Why electronic fares will spur cashless payments

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ED MCLAUGHLIN, president for operations & technology at Mastercard is showing the company’s contactless payment ring which is on pilot rollout in some cities at the Mastercard Innovation Forum 2017 held at Shangri-La Singapore. -- MELISSA LUZ T. LOPEZ

By Melissa Luz T. LopezSenior Reporter

SINGAPORE — Using electronic fare collection schemes for public transport is the best starting point to introduce contactless payments in a country, en route to establishing trust among consumers to steer away from cash.

“Transportation is the best form of creating a habit… It’s frequent and it’s public,” said Shubhrendu Khoche, vice-president for enterprise partnerships at Mastercard, said during the company’s Innovation Forum held at the Shangri-La Hotel Singapore.

“It also has a halo effect because if you do a contactless payment in transportation, the chances are that it flows over to the coffee shop and to all other places where you do business.”

In the case of the Philippines, there remains scope to see greater digital payments for day-to-day use, with progress seen in railway and toll fare collection systems expected to help spur increased e-payment activities.

“There will be new players who are coming and doing this function,” Mr. Khoche said, pointing out that even bus and ferry seats are now being sold online, which is expected to eventually spill over to the retail segment using bank-issued cards.

“The cooperation between the large business houses that were earlier competing and are now collaborating is helping this scale up,” he added, referring to a convergence forged among conglomerates as they agreed to a unified toll fee collection system earlier this month.

Part of the 13 toll road operators that signed the deal with the Transportation department included the San Miguel Holdings Corp., Ayala Corp. and Metro Pacific Tollways Corp., which also happen to operate other transport lines in the country, including railway projects in Metro Manila.

Success stories in terms of migrating to cash-lite economies such as China, Singapore and India came from a mix of targeted reforms introduced by the government, complemented by collaborations among private sector players in setting up one ecosystem that will accept and transfer payments across businesses and owners.

In London, some 40% of rail commuters now travel sans cash after the tube lines accepted bank-issued cards as a payment mode.

Roy Teo, head of the Technology Innovation Lab at the Monetary Authority of Singapore, said regulators and market players need to present an irresistible value that consumers need to see for them to decide to move away from cash-based transactions.

Ben Gilbey, Mastercard’s senior vice-president for Digital Payments and Labs, pointed out the Indian government’s “radical” but effective move to force consumers into using contactless payments as it demonetized higher-value bank notes last year. On the other hand, some countries sought to tap national identification (ID) systems and state biometrics data as a way to improve client access and identity verification.

Use of biometric data can go as far as fingerprint ID readers found in phones, and even voice and facial recognition technology to unlock and authorize payments on mobile, which has earned Mastercard’s Identity Check service the moniker “selfie pay.”

Other options being explored are iris scans and even heartbeat monitors, which are unique features in the human body which can be retrieved using more advanced technology. Over a thousand of contactless payment rings are also under a pilot run from Mastercard, adding to the host of wearables like Fitbit and Apple watches doubling as payment machines.

Such was the case for Singapore’s DBS Bank, which rolled out a fully online entity called Digibank, which offers financial services to over 1.5 million clients since its operations started just in April 2016. With no physical offices nor tellers and call center representatives, DBS’ Sonia Wedrychowicz said the bank simply relied on biometrics data and online documents to check identities of new depositors.

“Physical signatures were great many years ago, it’s the strongest thing we could have. In today’s world, the biometrics is so much stronger,” Ms. Wedrychowicz said.

The Bangko Sentral ng Pilipinas (BSP) has been leading talks for a National Retail Payments System initiative, which forces bank and non-bank providers of financial technology services to come together and set up faster and inter-operable money exchanges and clearing houses to facilitate faster settlements.

Philippine financial firms are working to set up two clearing houses for digital money transfers this year as part of an overall strategy that targets to raise the share of electronic payments to 20% of total transactions from a measly 1% share in 2013.

The BSP is likewise lobbying for the use of a “foundational” and biometric-based ID before the members of the Presidential Cabinet, which is eyed to be a universally acceptable material to establish a person’s identity. The Legislative-Executive Development Authority Council has endorsed the National ID System Act as an urgent measure, allowing lawmakers to fast-track its approval.

Finance Secretary Carlos G. Dominguez III has given support to this proposal, even floating the idea of having national IDs issued at birth to every Filipino.

Currently, the government issues a unified multi-purpose ID card, but only covers the services of four government agencies.

Mastercard’s Mr. Khoche said a national ID system would help in bringing more transactions into the formal channels, and would allow more Filipinos to get aboard the banking system.