Singapore’s Major Banks Declare a War on Cash
Singapore’s three biggest banks, DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corp Limited (SGX: O39), and United Overseas Bank Ltd (SGX: U11), have teamed up with another four banks to launch a digital-based peer-to-peer money transfer service.
The service, called PayNow, is a war on cash, said OCBC’s e-business head Pranav Seth.
In a related statement reported by The Straits Times, Singapore’s finance minister Heng Swee Keat said that financial technology companies (often referred to as fintech companies) are blurring the lines between financial and non-financial businesses.
Singapore’s banks will need to innovate, Heng said, as new fintechs tap on the wide proliferation of smartphones to offer competing services.
Shiny new service
The PayNow service seeks to alleviate a few customer pain points.
For one, the service provides a wider reach compared to current peer-to-peer transfer services offered by the individual banks in the partnership. Previously, consumers were only be able to transfer funds with other consumers from the same bank using mobile. Furthermore, if the consumer would like to transfer funds to another bank, it would require the consumer to key in the recipient’s account number.
With PayNow, users can transfer funds using their mobile phone number as an identifier. The service will also be available on mobile.
Big players in a big market
If the PayNow service gains traction, it could prove to be a defensive win for Singapore’s traditional banks.
The seven banks involved collectively process around 90% of Singapore’s retail transaction volume. The FAST (fast and secure transfers) money transfer service, which operates via internet banking, had 27 million transactions worth $54 billion in 2016.
Singapore’s banks are not likely to directly make money out of the PayNow venture. However, it could help Singapore’s banks fend off the threat of disruption.