COMMENT: When e-wallets run galore in Singapore

·4 min read
Overhead view of friends sending/receiving the payment of the meal through digital wallet device on smartphone while dining together in a restaurant
Too many e-wallets make it confusing for consumers. (PHOTO: Getty Creative)

By Sumit Agarwal

SINGAPORE — Several years ago, Singaporeans lamented the lack of e-wallets and the lag in implementing e-payment technology.

Now in 2021, they get to choose from a wide offering. Banks and non-banks have created choices such as Apple Pay, DBS Paylah!, FavePay, Google Pay, GrabPay, OCBC Pay Anyone, Singtel Dash and UOB Mighty. This is not an exhaustive list.

There are more providers, and in a general sense, the competition is great for consumers. It keeps prices low as each provider tries to appeal to consumers to increase its market share. The proliferation of e-payment also increases the productivity of merchants and firms.

But too many e-wallets also make it confusing for consumers. For example, I want to pay my friend my share of the lunch bill through a certain e-wallet, but he does not have that app. There is some matching of apps to be done that reduces the convenience that e-wallets stand for. Also imagine if I have five e-wallets on my phone, I would need just a little more time to decide which one to use for a certain purchase.

There is no doubt that e-wallets are here to stay. According to a study I did earlier, mobile payment boosts consumer spending and business growth. Examining extensive data from Singapore's administrative business registry and consumer financial transactions from DBS, we found that compared to industrial businesses, there was an 8.9 percent increase in the creation of consumer businesses each month following the introduction of DBS QR-code payments.

The growth was entirely driven by small businesses, particularly those that normally handle cash at a high cost, such as food and grocery stores. Moreover, business creation was pronounced in public housing communities, low house-price areas, and non-prime districts, suggesting mobile payment technology can help promote inclusive growth.

The study also showed that consumers significantly increased their total monthly spending by 4.2 percent after the technology was introduced. This is good news for business creation and consumer spending, both of which are vital to a thriving economy.

Spoilt for choice

Now that we have plenty of e-wallet choices, the next question is which one to choose.

For individuals, they can choose two or three e-wallets that are most suitable for them in terms of convenience and their lifestyle. There is no need to download all the offerings that are available.

For businesses, convenience, usability, security and popularity of the app are some key factors to consider. Some firms may just turn to the provider that they have an existing relationship with. For example, they have an account with a bank, so they just use the app related to that bank. But a wiser way would be to assess their own needs before making the decision.

More than the technology itself, businesses can think of how to leverage the new features of mobile payment to deliver superior value and engaging experiences to their customers. If the consumer experience is safe, fast, and efficient, businesses and consumers will continue to be the winners in the mobile payment era.

The only losers may be cash and cards. We all know that with concerns about the risk of spreading the coronavirus by handling cash, the pandemic has nudged even more people towards adopting mobile payment. In April 2020, it was reported that local banks saw more customers switching to digital banking. For example, OCBC and DBS saw the number of PayNow transactions nearly doubled in the first three months of 2020 compared with the same period in 2019, according to a Straits Times report.

While credit and debit cards are still extensively used, I believe that the growth of e-wallets will take over credit cards one day. For now, the battle of e-wallet providers is still continuing as they fight for market share. Time will tell who emerges triumphant.

Sumit Agarwal is the Low Tuck Kwong Distinguished Professor of Finance, Economics and Real Estate at the National University of Singapore (NUS) Business School. He is also the co-author of Kiasunomics and Kiasunomics 2. The opinions expressed are those of the writer and do not represent the views and opinions of NUS.