NETS Group’s Lawrence Chan: “We never saw our role as getting 100% of payments”

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Interviewed By Foo Boon Ping

Lawrence Chan, Group CEO of the Network for Electronic Transfers Singapore (NETS), discussed how the group is helping to shape the cashless payments in Singapore by focusing on merchant acquisition and servicing, especially in the small and underserved areas that account for most of the daily transaction volume.

Lawrence Chan, at the helm of leading payments services group, NETS, in Singapore, points out that the group is in a “privileged” position to further enhance the cashless payment experience for everyday purchases and small business owners. The NETS Group operates the country’s national debit scheme, enabling customers of the biggest banks to make ATM and mobile payments in more than 120,000 service points on top of online payments.

It has come a long way since its inception in 1985 as part of Singapore’s ambitious plan to become a cashless society.

It started out as a company owned by the major banks, comprising Development Bank of Singapore (DBS), United Overseas Bank (UOB), Oversea-Chinese Banking Corporation (OCBC), and OUB, which was acquired by UOB, as well as Keppel TatLee Bank, merged with OCBC. 

Along the way, there have been many landmarks in how cashless payments have evolved, essentially with digital and direct payments, stored value facilities, and later with faster payment. Another landmark was reached in 2017 when Banking Computer Services (BCS), which runs the Faster Payment networks in Singapore as well as truncated cheque services, was merged under NETS.

For Chan, the group’s wide reach means it has become an integral part of daily life in Singapore, but he recognised that more can be done at the merchant front like the introduction of touchless mobile payment systems to more small businesses –such as hawker stalls that have few workers—as well as a cash advance service to supplement working capital.

As travel for business and leisure reopens, more regional cross-border payment initiatives are also on the horizon for NETS, with a focus on ease of use and cashless payment services in underserved locations and industries for Singaporeans and visitors alike.

The following key points were discussed:

Here is the full transcript:

Foo Boon Ping (FBP): Good morning and welcome everyone to another edition of Radio Finance. This morning we're very happy to be at the headquarters of the Network for Electronic Transfers Singapore, more popularly known as NETS. And we are here speaking with the Group CEO of NETS, Mr. Lawrence Chan to talk about the evolution of NETS as a payment service provider in Singapore.

Chart for us, Lawrence, the journey that payments has made towards more cashless, more digital payments, and the role that NETS has played in that journey.

Lawrence Chan (LC): Thank you for this opportunity to speak about the NETS’ story and specifically the NETS’ story in Singapore.

As you’ve rightly shared with us, the ownership of NETS is our three shareholder banks, the three local banks of Singapore.

And the emphasis really is to create cashless payments in Singapore with increasingly better user experiences. I think the focus on improving user experiences is key in addition to safety and security. With safety and security, sometimes people take it for granted and then they look for the incremental benefit of a better user experience.

But we've been very focused on safety and security and now equally focused on bringing that very good user experience to the seller and to the buyer, to the consumer, like you and I, and to the merchant. NETS has been very privileged to be in a position to help solve payment pain points in Singapore. On the merchant’s side, we have had many good experiences where we have the opportunity today to be the infrastructure provider for payments, especially in the offline space or what we call the face-to-face payment.

In the face-to-face payment, we really have the privilege now through these years to be able to place our infrastructure across the merchant cashier locations. And this has helped with different form factors.

Form factors were started off with plastic, started off with personal identification number (PIN) as an authentication. Now to tap and even now with mobile devices. Mobile devices now can even scan a quick response code (QR) on these terminals, so sometimes it’s a paper static QR.

From a face-to-face perspective at the merchant front, we have been really given the opportunity to lead both, as I would say front, top of mind payment brand, in addition to infrastructure player.

In addition to payments, you also mentioned the opportunity that NETS Group had in 2017 when Banking Computer Services (BCS) and now what we call NETS Solutions, joined the NETS Group family.

Within this NETS Group of the three entities, now NETS entity, BCS, and NETS Solutions, we really have the privilege of trying to fulfil our purpose. Our purpose we have on this feature wall behind us is connecting communities, empowering lives. Now, we really have the privilege of bringing communities within Singapore together through payments. I like to phrase it as we are really given the privilege of looking after the smallest transactions like when I buy my tau huay at a hawker, to the largest payments in Singapore where we are helping our central bank, the MAS, build things like real-time gross settlement systems.

If you think about it, the responsibility is great and the purpose of why we are here, to really drive the payment infrastructure, to drive the payment brand is really key for us.

Another way of describing BCS would be the operator for Singapore, operator for payments, where to be the operator of choice, especially when the sender and the receiver are from two different financial institutions.

Being the clearing house in Singapore with different products, as you mentioned, cheque to the GIRO, Fast Payments, and even PayNow.

With NETS Solutions, we're given the privilege of building different payment infrastructures over the years for central banks.

Building an infrastructure, owning the infrastructure, working with the industry to clear payments, and also having our own payment brand in the front end makes these four words of our purpose statement really come alive for us.

FBP: You come from a very rich background in payments. Just prior to NETS, you worked on client management at Visa, international cards payments. Not just cards but all forms of digital payments as well. And before that PayPal, a disrupter to traditional payments, and American Express.

And when you joined NETS, when you look at the history of NETS and the role that NETS has played, at the time when you joined in June 2020, what would you say was the role of NETS back then and what opportunity did you see?

Cash is still very predominant in Singapore, especially for small merchants, taxis for example, there is still a high level of resistance towards digital payments. The market is still very fragmented, although NETS has this privileged position to drive digital payments formed by the three dominant banks.  Other banks are still doing their own things while they have NETS to strategically drive some of theirs, they are still writing their own payment initiative. For example, DBS and AXS, which can be described as a competitor maybe.

And you have also the EZ-Link, another big use case for payments that is easily there to compete. When you joined NETS, what are the opportunities that you see that you could do to drive digital payments?

LC: Thanks, Boon Ping. Maybe let me pick up a few words that you mentioned before I answer the question. When I started in this line, I used to tell people I was in the card business. Now it sounds more up to date for me to say I’m in payments, although everything I've learned in cards is totally applicable.

Last time when you say cards, now it’s payment credential. How can we improve the experience with better payment credentials? Moving from card payment to payment credentials in the payment industry.

You mentioned a lot about competition. I would say competition is good because it gives consumers choice. And it's something that we have seen from our own data. When a merchant takes more payment options, the NETS volume is naturally higher as well, because the merchant is very used to, not averse to digital payments and therefore cash becomes a lower priority.

And the privilege of being in payments so far. I don’t know how about a lot lately but definitely for my generation, the benefit of being in payments is despite the economic cycle, there's always opportunity to grow because we're really going – we're eating into cash.

We have the understanding in the payments industry of discretionary spending, non-discretionary spending. Maybe during downtimes of the economic cycle, discretionary spending may go down but non-discretionary spending, you have to buy your groceries, you have to pay your bills.

Non-discretionary spending is something that remains relatively constant regardless of the economic cycle. And because we're going against cash, it always gives us the opportunity to grow.

Going to your question of what are the opportunities that have been identified? I think I inherited an amazing business of these three entities we spoke about earlier. If I may just focus on the NETS entity first.

If we look at the NETS entity, we are very privileged to be owning the infrastructure for all face-to-face payment, to the extent that we can then add more value. And what I mean by adding more value is because today, for almost every shop, the terminal or the infrastructure is provided by NETS, not 100% because there's competition as you said.

But because we provide the infrastructure for NETS transaction, whether it's PIN-based or through tap, or you can scan the QR, we then tried to make these terminals work more for us, and we supported the government initiative a few years back to go to unified point-of-sale (UPOS). With unified point-of-sale, that terminal can take NETS, can take Visa, and many other competitive brands as well. And therefore, the terminal works more for us, we then make it more cost efficient for us to be placing these terminals at the merchant store.

We have done that and we are also now trying to meet the needs of the industry, especially during COVID. I joined during the peak of COVID in June 2020 where even coming to the office felt dangerous.

And at that time, the aspect of contactless payments, even until today, is important. But what really helped us at that time was the fact that quick response (QR) code, which was quite unknown to the general populace, became a way of life because we had to scan before we could enter any building, we scanned almost everywhere we went to. Scanning a QR, and then eventually now paying with QR, became much more normal than before.

If there is any silver lining to the pandemic, it made digital payments, even at physical face-to-face point-of-sale, become more dominant. One of the short-term opportunities we saw is how can we help increase contactless payments, given the infrastructure that we have in Singapore.

For contactless payments, we worked very closely with the industry to push for QR payments. QR payments, especially at hawkers where we are today, we have more than 60% of all hawkers in Singapore that can already accept one form of digital payment or another. And I would say it takes a village to raise a child, it takes a village to raise a new payment, a payment form factor like QR.

From the incentives that the government had andgave in terms of trying to educate the sellers, the merchants, to take more digital payments, plus all the effort that was put in by the payments industry, I think that really saw an increase.

If I may say, that is good, but we must always be looking for opportunities. If I just focus on local, just from within Singapore, and the opportunities that we saw, we definitely saw an opportunity to increase ourselves and be more relevant at the merchant front because competition is increasing and we want to remain relevant.

We never saw ourselves in a role to get 100%. But how do we continue to be relevant to our consumers, as a result relevant to our merchants, and as a result relevant to our shareholders? And the focus for increasing how we can increase our relevance domestically at point-of-sale was to look at user experience. User experience is the very key.

As you mentioned, transportation, there’s still a big opportunity to increase user experience. As you mentioned, even from the heartland stalls, the long queue, it is very important on how can we get more digital payments. And it's not just a cost issue always, it’s the time taken, it’s the efficiency, the real and the perceived efficiencies that the users can feel both on the merchant side and on the user side.

The need for NETS to increase point-of-sale efficiency among small businesses

We are looking at how we can increase this point-of-sale efficiency. Things like tap, for example, increase in tap transactions, which is not new, it’s not rocket science, it’s really happening in Singapore. But for NETS, how can we do more tap transactions in addition to scanning of QRs.

Then, of course, the other great opportunity we saw was, it is no secret that we are not very strong online. We really have a real nice privileged position in the offline or face-to-face payments. But in the online e-commerce space, we are obviously not the payment option of choice today. And that's something we saw as an opportunity and something that we really wanted to make a difference in.

Using transportation as an idea, we then launched this product called NETS Click and we did it with ComfortDelGro Taxi (Comfort). We call it like a card-on-file experience. When you go into the app of the merchant app, you can then choose the different options and NETS Click will be an option where you can put your NETS card as the card on file and every subsequent ride that you do, you can then charge it in the payment. That's something we have done and something that we hope to do even more, with more apps.

We know that in Singapore today, more than 60% of all e-commerce takes place in-app, not on web, but in-app mobile payment. It's something that we really want to push even harder to get more relevance in the online e-commerce space.

If I summarize it from a NETS entity standpoint, it’s how do we increase our relevance at the merchant front with better user experience, how do we improve our relevance online, and last but not least is how do we increase our relevance to our merchants. What NETS can bring to our merchants.

Whether it's a face-to-face merchant, with the terminals that we put there, what more can we do? What more can we do for you? In almost any survey, whether it's in Singapore or almost any market we have done as well, we know that there are different reasons or criteria that the merchant is looking for. And one of the criteria that almost every country, every merchant would say is the concept of a one-stop shop.

What more value-added services can we give to the merchant given that we are already there. Early on, we talked about unified point-of-sale (UPOS), where the terminal can serve other purposes, what more can we then provide in the terminal to help merchants? That is something that we're looking at, and hoping to test, and then to launch, and see the receptiveness in the market.

We're also working with our merchants to help them understand their customers. With the data that we have, we can create different types of customer profile to help our customers, especially the face-to-face merchants, who probably find it slightly more difficult than e-commerce merchants to understand their customer, because the data that they collect from the customers is much less than in the online space.

Helping with our data, how can we help our merchants, especially offline merchants, understand what type of customer profile is coming into their store, what type of customer profile are they strong at relative to their competition, relative to the industry, and what type are they weak at. And how can they increase the profile of the weaker, and how can they defend the profile where they are strong in, and it’s something that we started working with a few merchants here in Singapore and we have received very good reception from them.

FBP:  Talking about the pain points for NETS as an acquirer, as a payment processor in working in this space – the offline space working with merchants, I'm sure from a merchant’s perspective, there's a lot of fragmentation because there are a lot of acquirers, because there are a lot of payments service providers.

There are fintechs coming into the space, looking to provide wallet payments and so on and so forth, which should all be consolidated. And you have individual banks as well going to the merchants. How much consolidation can be done under NETS as the one acquirer, especially working with the banks that are now under NETS? How much fragmentation is there actually that causes confusion to acquirers today? And is that something that can be improved on?

LC: I think it's definitely our role from a commercial company to try to win the hearts and minds of our consumers so that they will use NETS more. It's also our role to ensure that where they want to use, we sign up the merchants for them to use. And I think, generally, all payment options are thinking the same way.

Then how do we influence that, given that we have the infrastructure? It then truly comes down to economics, how does it make sense for the different players to leverage what we already have in front of the cashier, and how can we then make it even more efficient for the merchant, especially from a reporting and reconciliation standpoint.

If I were the merchant, because you talked about fragmentation, confusion – maybe let’s speak segment by segment. I think from a merchant standpoint, reporting and reconciliation are very important for payments. They have to reconcile almost every payment. That's something that we can help from NETS, and potentially for other payment options given again the infrastructure that we have. So going back to that point of how can we be that one-stop shop and the different values that we can bring to the merchant front.

Having said that, if you walk up now to almost any basement in a department store in a shopping centre in Singapore, you may see at one merchant multiple options to pay, multiple terminals sometimes, multiple QR sometimes. Is it our role, as NETS entity, to try to make a difference there? To some extent, yes. But largely, if I may say, we have to look after what's relevant for our business, to our buyers and to the merchant, because every payment option will be trying to win the hearts and minds, and wallets, of their users there.

I think the different industry bodies in Singapore has been doing a very good job. SGQR being one example, where we play the central depository. As in BCS, one of our entities, plays as the central depository of SGQR. But we still allow that competition with SGQR. The different payloads of the different payment options appear on that one QR. And of course, we, being part of the NETS group, NETS entity also definitely supports and doesn't put a separate QR.

But we support the SGQR and we put our payload within that QR. We're in a space where there is some form of order that is coming in or has already started and we definitely want to promote that. We want to give the opportunity for the consumer to then make that choice.

We want to give the opportunity, to some extent, for the merchant to make that choice. But I think the ability to make the choice is something that we do not want to take away. But we want to give the different user experiences, the different economics, the different pricing that we can put in play to help make that choice in our favour.

FBP: On that area of pushing more online payments, you gave the example of Clicks working with ComfortDelGro, tell us in terms of adoption right now, in terms of usage. Obviously, those areas are very familiar to users who are using the competition like Grab, and there are apps already, in-app, where they can link with a credit card or even a debit account, and so on and so forth. How is that generating traction?

LC: It's early days for us. We made a minimal viable product available in the market. And we are understanding what are the pain points that exist in the product, we are carrying through those pain points before we invest in scale across different apps in the marketplace. But with the more than a handful now of merchants that we have using NETS Click, we are seeing the adoption increase.

I wouldn't say because we provide a superior user experience, because our experience is as good as, or maybe slightly better, but definitely as good as a normal card on file experience. I think our economics, NETS being able to provide – being a debit product, provide better economics for the merchant, it’s what the merchant likes, and given our experience in managing merchants, especially from reporting and reconciliation standpoint, it’s something that we know how to meet the needs of the merchant, and that's what the merchant likes as well.

We also understand that in e-commerce, or in online payments, the concept of conversions and minimising dropbox with this card on file experience that we’re working with merchants, and maintaining their safety and security is something that we, I think, have been able to bring to this online space and getting more traction.

FBP: Talking also about payments today, payment did not exist on its own. Payment is part of an important ecosystem, right? In this day and age of super apps, would NETS consider itself becoming a super app, linking an ecosystem and making payments part of it? But you're also extending into other areas, like providing financing solutions to merchants. Today, tap, for example, exists as flash card, NETSPay, but to make it really successful as in-app, would it be more successful as part of a super app or having your own super app?

LC: I hear you. I think there are many good success stories, especially in China, and even in Southeast Asia of the names you mentioned, where the super app has proven successful overtime.

FBP: There areseveral thousands of merchants in your network?

LC: We have, not so many, we have about 120,000 points where NETS can be used. NETS as a payment option, and you mentioned NETS as a payment option relative to super app. Today, we try to understand the role that NETS plays and, again, I focus on NETS entity. For NETS entity, we can be described as a scheme, other similar international schemes will be like Visa, Mastercard.

For scheme, meaning that we bring the issuers and the acquirer together. The issuers own the buyer, the acquirers own the merchant. We are a scheme, the NETS scheme, the local debit scheme in Singapore. We play the role of a scheme and we also play the role of an acquirer so we manage the merchant side.

Our strength today is on the merchant relationships because we are the acquirer for every NETS transaction in Singapore. Our banks, whether our shareholder banks or the participating banks, they bring us to consumers. The consumers either can use through their phone, or they can use through a physical plastic to either use a PIN transaction, a tap transaction and a point-of-sale, and as we're saying now, even online with some apps. We’re hoping to make that even more.

The consumers actually come from our issuers being a scheme owner. The merchants, we do it ourselves because we're not only the scheme owner, but the acquirer for the merchants. To move down the super app is not in our objective because we don't own them. We don’t own the consumers; we own the merchants.

Cash advance as a value-added service for merchants

You mentioned just now also that we provide, or we started piloting merchant cash advance. Merchant cash advance is a form of working capital loan for merchants. The lender on record is our banks, not us. But the data that we get permission to share, the merchant data, the payments data, so that they can do better underwriting for the lenders, which is then provided by us.

So yes, we do that. But again, as you can see, the focus is our relationship. It’s with the merchant, and it’s where we can do it.

FBP: In essence, you are more of a utility provider to the banks. Tell us, in terms of commercial aspect –

LC: If I may interrupt. We're not a utility provider to the bank because we own a business relationship with the merchants. I would like to see us as really providing value to the merchants. The more value we can provide to the merchants, in addition to the NETS transactions they see, that’s our reason for existence with the merchants.

FBP: The merchants are your primary customers, where you're deriving commercial value from.

Tell us in terms of the business model, mainly it’s in the merchant discount that you're earning from. And where does the bank come in? And you're owned by the banks. How does the commercial part of it pan out?

LC: Like any payment today, it’s the entity that pays for that transaction. For the majority, 99% of payments across the world, it’s no different for us.

Our customers are merchants because the merchant pays us the fee for that. And because the merchant pays us a fee for that, we must provide a price value equation to the merchant. What value do we then give to the merchant as a result of the price they're paying for each transaction And when the merchant pays a fee, like in any business model that exists today, there is the closed loop and the open loop.

In the closed loop, the owner of the buyer, that customer is also the owner of the merchant, then they just share whatever the merchant pays. In the open loop, where the owner of the customer may not be the same as the owner of the merchant, then there is a form of price sharing on what the merchant pays. The same concept that exists across the world also exists for us.

FBP: Tell us in terms of the numbers, the volumes, the revenue that NETS make in all your lines of business.

NETS to remain focused on small, day-to-day transactions

LC: I won’t go down to the exact numbers but if you look at what we do today, we are very relevant, I would say, in the face-to-face, in the everyday spending journey, and this is what we also focus on together with our banks. Not just the shareholder banks, but all our banks that can reissue a NETS product.

Every day you spend from the moment you wake up. You take your transportation for mass transit, to buying a coffee before you come to the office, going for lunch, taking a transportation home, and potentially even buying dinner for the family. All this everyday spending, including buying groceries on the way home, can be done with a NETS product. It can be done through your phone, it can be done through a piece of plastic, it can be done through a PIN or tap.

In terms of everyday spending, that's really our focus. Are we focused on the high-end luxury goods? No, we’re not. Are we focused on cross-border? It’s something we haven't talked about but definitely we’d like to talk about it. So cross-border today is still a very small part of our business but it's something that we're very excited about and we want to do more.

But from an everyday spending – not so much again the luxury spending, everyday spending, definitely we are very relevant. Is it our objective to go into the luxury spending? No. Is our objective to go into the cross-border spending? Yes.

More cross-border payment corridors to be opened as appetite for travel increases

FBP: Talking about cross-border spending. You're part of Asian Payment Network. And right now, there are active cross-border payment arrangements with Bank of Thailand and also with Malaysia PayNet and PromptPay payment. Those are the two. Tell us, in terms of the opportunity for cross-border payments for NETS and for Asian Payment Network, will there eventually be an easy-to-use cross- border payment? For retail payments, as we travel, there's a lot of regional travel, for tourism, for business.

LC: For cross-border payments, if I take it at one level, for the account-to- account, as you rightly pointed out as an example, we launched the PromptPay-PayNow. As a PayNow user, you cannot only pay somebody in Singapore just by knowing the National Registration Identity Card (NRIC) or the phone mobile number basically, we can now do it with a friend, an acquaintance in Thailand as well. We believe this is the first in the world where we are connected account-to-account with mobile being the proxy.

This was done at the industry level by BCS as the operator, which is part of the NETS entity as mentioned, and we’re the operator for this. I think we played a big role by being the operator that enabled this. But, of course, the sender bank and the receiving bank are the financial institutions across two countries and it’s still defined as in the pilot stage. We’re very careful, we kept the limit of the transaction to thousands in dollars. And we measure velocity and all that to make sure that everything is still-

FBP:  How is that doing? Because that's been like almost a year also already.

LC: It has definitely picked up a lot, especially with borders opening more now. It’s a two-way flow where we get both inbound and outbound.

FBP: It can be used for remittance outbound, inbound?

LC: It can be used but given the size of it today, the use cases would definitely improve when the limits are increased. But I think for now, it is going well. And we are looking at different corridors as mentioned.

I would say, account-to-account where we play the operator role, supporting the industry here in Singapore and supporting the industry on the other side, is something that we are very committed to make it work at the national level.

Going back to our purpose statement of connecting communities, now we really have the privilege to connect communities across countries and not just in Singapore.

Then there's the other aspect of – what I just shared, account-to-account is what other people call in the industry person-to-person, P2P payment. There's also person-to-merchant (P2M). Today, we can do P2M, person-to-merchant in Singapore with a piece of plastic, via the PIN or tap, and you can also do P2M with scanning the QR in the hawkers.

During this COVID period since I’ve joined, I’ve been working very closely with my team and also talking to our peers and colleagues in other markets in terms of how we can establish corridors, maybe we can do person-to-merchant payments when they are here in Singapore, and when our buyers go to their market.

The real privilege that we can offer in Singapore, although it’s a small market, but, as you know, it has a real heart for travel. And things are opening up, travel is starting again. People do come through Singapore, come to Singapore.

And as I shared early on, we’re not only the scheme, for NETS, we are also the acquirer. The moment we say yes, we can open up almost every point, subject to the commercials, to an inbound user. As compared to many other markets that we worked with, the scheme and the acquirers are separate entities, and therefore, we have to work with them slowly for them to increase acceptance points for an inbound user that goes into their market.

Today, we are working. Just before COVID, we launched for Malaysia, for card. If you go today to Johor, Malacca, KL, Penang, you can use your NETS card to PIN – with a PIN to do a transaction.

We are now having conversations from Malaysian corridors, and many other corridors for QR payments. And the benefit we see for this is just like here in Singapore, NETS QR payments in the long tail, in the smallest merchants, in the heartland areas, it’s where QR payment is very dominant. And the international schemes are not so strong there.

There’s a value we bring here, and that's the value we think we can bring in other countries as well, if we can get access to QR payments in other places, more digital payments can happen in the night markets, more digital payments at the micro level, and more digital payments can – and that means for a traveller, they will then have a need to carry less cash. It’s not just for the larger payments of your hotel bill that you can use digital payments, but even the smaller payments, from a P2M standpoint, you can use with QR.

FBP: A lot of this is happening at the bilateral level, whether between Thailand or Malaysia.

Talking about Asian Payment Network. This is created under the aegis of the ASEAN Economic Community or Council to drive this kind of single regional market, so to speak.

For those issues that you mentioned where the acquirers and the operators are the same, are there too many of these complexities for it to work?

How much bilateral work is being done at Asian Payment Network? How active is it? A lot of it is actually happening at the bilateral level, between countries which has got infrastructure and players who are relatively more ready?

LC: Let me speak from a commercial standpoint. From a commercial standpoint, I shared about the account-to-account, P2P, and then the person-to-merchant with a QR.

For this to happen cross-border, I think one fundamental prerequisite needs to happen. And the fundamental prerequisite is, domestically, it must be a relevant payment option. If it's not relevant domestically, no point in creating a cross-border, even one corridor. Because if I don't know how to use it domestically, I will not use it for cross-border.

FBP: NETS?

LC: Yes, if I use the person-to-person (P2P) standpoint, being BCS the operator for PayNow, where all the banks are very supportive. And we have PayNow – I think, the statistic is more than 70% of Singaporeans have already downloaded and used PayNow before.

Domestically, PayNow is very relevant so when we did PromptPay-PayNow, it becomes very intuitive because they’re really doing it domestically. There's trust in the system already.

If it wasn't the case and we just launched PayNow now, we will not be doing a cross-border corridor because it wouldn't be too intuitive, and the safety and security, the trust element will not be there yet. That prerequisite of account-to-account must be relevant domestically, it’s the same for person-to-merchant (P2M). Today, as we shared earlier on, with COVID, more than 60% of our hawkers now has QR as a form of payment.

More and more people keep on using it.. When I see my daily stats, we can see that number increasing. It becomes even easier. When you and I go to another market and see a QR, and we are told that we could scan that QR, then it becomes more and more – we get more comfortable with it. Of course, we’re also looking to make sure that our is competitive from a foreign exchange standpoint, so that they feel as if it’s as good as using cash.

FBP: In terms of the domestic payments, from P2P, scanning of QR, you also mentioned tap, which is near field communication (NFC), a lot of it. From a user perspective of better user experience, what's the preference between tap and scan?

LC: From a NETS standpoint, both are increasing very aggressively. From my experience in my previous life, the real benefit of tap and scan is understanding that we are penetrating against cash. Not so much as beating competition.

FBP: But from a consumer’s perspective, maybe there is a preference, right?

LC: There’s a preference because it’s so easy, I don't think twice. I don't have to look and I can get more used to it. As a result, I withdraw less cash from my ATM. During the pandemic, there was nearly a fifth to a quarter reduction in ATM withdrawals as well. As more and more of us get more used to digital payments, we get less reliant on cash and we then use digital payments even more.

FBP: From a merchant perspective, from a cost perspective, QR code is more cost effective because you just need the code, the QR when you scan, you probably need a device to scan that. From a user perspective, I think scan might be more preferred because it's so easy.

LC: I think you’re talking from a merchant point of view, right? From a merchant point of view, especially for food and beverage (F&B). If we just focus on food and beverage (F&B) first. For F&B, if you go into our UNESCO hawker centres, we believe that the QR is a better form factor, not just from a cost standpoint but from a user experience.

With a terminal, as you probably know, if you’ve done a tap transaction, a sensor is attached to the screen. With oily, wet fingers, it becomes a bit more cumbersome. But with QR payments, the merchant doesn’t have to touch anything. They can continue preparing the food, and we've created for all merchants, especially for our hawkers, what we call the NETSBiz app. On their own phones, they can download our app as a merchant.

Whenever a transaction takes place, there will be a sound, there will be an amount that is being read out, and comes out with the largest font on their phone. The merchant doesn't have to rely on the consumer to show how much are paid. The merchant can actually just trust their own phone. When they see the payment on their phone, they know that the payment has been made through QR.

The user experience for the form factor QR, in itself, is very strong for F&B.

For retail, yes and no. You can argue that a card or a terminal is as good as. But again, depending on the type of retail. From a quick and larger ticket size, I will use the example of a durian shop. Durian is not that cheap but food stalls using QR payments is also a very good form factor. They can continue to cut, they can continue to serve you, put it in a styrofoam box, wrap it up, and the payment is done. They hear it through their own phone– their own phone, their own device–and they trust their own phone, their own device that a transaction has been made.

It wouldn't come into the situation where, for example, it’s $33 for the durian that you bought. But if the consumer keys in $3.30, they can see themselves, they can see the error straight away. They don't have to take off or move their glasses to check whether you actually paid when they show the phone. It's something that we've been working very closely to understand what is the best user experience for our merchant.

FBP: Despite COVID and the inconvenience that it’s caused and this whole move towards contactless, still you have 40% of merchants who resist it, so to speak.

LC: Resistance sounds negative. I’ll focus on the glass half-full or more than half-full that have been moving in that direction. And it's happening every day. Every day we have almost a hundred new merchants signing up. As you probably know, rightly or wrongly in the F&B space, there's a lot of churns in the industry, and as more new merchants come up, more new merchants are being very open to digital payments as well.

FBP: Some industry trends in terms of open finance, right? The use of application programming interface (API), going on the cloud, and so on and so forth, and open banking, embedded finance. What's your take on this and how does it impact NETS? The merchants that you're working – the bigger ones will always be relevant, right? API is relevant to the small merchants.

LC: API per se to me is a form of communication between one entity and another. When we do online payments, definitely API becomes a much easier way to connect to us, or to any other entity. For online payments today, it is not just the big merchants, but even the smaller merchants looking at online payments. I would say that this is no longer a barrier. Almost every merchant who is in online payments can do online and are able to connect for payments to happen.

I think the important criteria of safety and security in the transaction, the important criteria of having a good user experience happens today because of a few things. Not so long ago, we did all e-commerce transactions on the web. More and more transactions then took place on mobile devices, but still web-based. The focus at that time was then how do we – and that was probably about six, seven years ago only – how do we then mobilise a website so that it becomes mobile- friendly.

From there, it moved to in-app transactions, and in-app transactions happened also because there's more consolidation in the online retail space, and more and more of the consolidation took place on apps. You moved from mobile web to app. Many of these sellers could either sell on these market places or could sell by themselves. If it's all on the market place, they will need API integration, as well if they sell by themselves, as well if they created their own website. They needed API integration to connect with payment players like us.

I think the industry has really moved. Will more consolidations happen? I think so, yes. Will payments, user experience keeps on changing? I think it will. And it will continue to move, I believe, to where more and more payment becomes less important in the whole process. I used to say I was in the card industry, now I tell them I’m in payments.

FBP: In the app industry.

LC: Because last time in the card industry, the colour of the card is so important. It is still important today. I’m not saying it’s not. But now, you don't even see the card, and the payment is made from your – even our ATM card, NETS Click as an example, you don't even see the card and the transaction has taken place.

It’s moved from one form factor of a physical hard plastic, or metal, to what we now call payment credential. With the payment credential, which is extra safe and secure, we can now do the transaction.

FBP: And when the business is moved to the app, even for a hawker, their business virtually go online as well, because it's no longer the person standing in front of you ordering food, it’s someone ordering food through the app, which then you prepare, then someone will pick it up and send to the user who can still be at home. That's an opportunity for online expansion as well.

LC: If I may add, the huge transformation opportunity that happened in the industry level is when capacity increases. And I think we’re starting to see some of it.

At least from my understanding, it will happen when fifth generation wireless technology (5G) becomes more dominant. When data can move faster, quicker and decisioning can be done faster, the user experiences will then change again, to a level where we're not experiencing today.

That will be the next big change for payments, when the capacity of information flow increases.

FBP: 5G for some out there. Again, you're dealing with daily payments, for everyday life, smaller value.

LC: That won’t change for us. Today, we are really the everyday spending, being a debit scheme. We are not going after the high-end. We are starting to do the cross-border. But even the cross-border we're looking at how to be relevant for smaller. Again, it's not potentially to pay your hotel bills, but to pay in places where you couldn't pay traditionally.

Where I'm coming from, when speed and capacity increases, 5G as an example, that’s where the user experiences will change and payments may change as a result of that.

FBP: You mentioned earlier that safety and security is a primary concern for your merchants, for your users. A lot of that goes to daily expenditure, small ticket relatively. What level of fraud or cybersecurity issues do you have to manage as compared to maybe, Visa where they have bigger items and a lot of online commerce?

LC: I’d like to think that we are not short at all. We understand payments here at NETS, whether it is face-to-face-transactions, or e-commerce transactions, very blessed at this point in time since I have joined, and from what I have said prior, we have not had a major breach.

Do we sit on our laurels? No, because you can never. And we always have to be one step ahead. We work very closely with our regulators, with the industry to understand what are the best practices.

What's the minimum, and what's the bar we want to set for ourselves above the minimum. And today, again, not being complacent, but we are at a good place. We’re at a good place from a fraud standpoint, or from a cybersecurity being penetrated by any of the domestic, or world hackers.

FBP: Of course, on the other side, when you do more cross-border payments at a higher volume, anti-money laundering (AML) issues and know-your-customer (KYC) issues also come in as well.

LC: We are starting – as I shared for cross-border—we're starting on the bilateral, not network. But it means we are not going into a multi-country arrangement straight away. Of course, we love to be that one day, but for now, and from a bilateral level, and we are speaking to the NETS equivalent in another market.

We also have the support– from a government-to-government (G2G) standpoint, to ensure that the entities we speak to are the right entities as well. That allows us to make sure that there's minimum standards, whether it is KYC, AML, we definitely adhere to and not compromise.

FBP: And finally, going forward, what are your initiatives, growth plans and priorities?

LC: For NETS entity, it is very important for us to stay relevant. I like to use the word relevant and not domineering. Relevance for our buyers, relevance for our merchants, and as a result, relevance to our shareholders and our participating issuers. Relevance needs a certain skill, what is that relevance skill can differ. And we always need to look at different ways to increase that relevance.

As I’ve mentioned, domestically for face-to-face and for e-commerce, creating new products, and always launching new products, helping our merchants add more value, with the merchant’s cash advance.

FBP: Helping them go online.

LC: Helping them go online and being able to accept NETS as a payment factor online. And even helping our merchants receive inbound customers. As more and more travel starts to resume, we've been doing this corridor, opening up corridors for person-to-merchant (P2M). When more and more shoppers come in to Singapore, tourists come to Singapore, they can then—

FBP: And it’s great for the hawkers too.

LC: Correct. And they can use it, they can make digital payments even at a hawker.  We are working very aggressively to bring more value domestically, and from a cross-border standpoint.

From a cross-border standpoint, inbound and even outbound, making it easier for all users to use. And I think for the other parts of the NETS Group entity, is how do we continue to serve the industry well.

To serve the industry well requires a slightly different mindset from just commercial, driving revenue up. How do we always ensure that we do not compromise on any of our standards, any of our commitments, working very closely with our regulators as well to make sure that we're serving the industry as per the level that we have set forth. And making sure that each of the different constituents within the industries’ needs are met.

FBP: Thank you, Lawrence, for speaking to us.

LC: Thank you for this opportunity. Thank you.

FBP: Thank you. And I'm sure this will be the start of a series of conversations that we will have on payments, as you progress into some of this cross-border initiative, and increasingly as you move to the online space.

LC: Looking forward to update on the progress that we’re making.

FBP: Thank you, Lawrence.

LC: Thank you. 

Keywords: Cashless Payment, Mobile Payments, QR, Debit, Payment Infrastructure, E-Commerce, Merchants, P2P, P2m

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