When diffusion hits a snag

15 Jan 2019

Business Times, 15 Jan 2019, When diffusion hits a snag 
Singapore’s fintech sector will receive a significant boost, with the passing of the Payment Services Bill, as it considerably strengthens consumer protections. Specifically, it will regulate the issuance of e-money, so that the funds we have in our e-wallets (including those for peer to peer transfers) will be protected by legislation. Personal e-wallets will also receive added safeguards in the form of e-wallet and transfer limits, thereby according greater protection to vulnerable users such as the elderly and the young. These measures will help to raise consumer confidence in e-payments and help Singapore catch up with its regional neighbours in areas such as mobile payment adoption, thus advancing our push to go cashless.
It is indeed surprising that despite Singapore’s early embrace of cashless payments, that we are not further along in realising our vision of a cashless society. After all, electronic payments have deep roots in Singapore. Over three decades ago, in March 1985, the government launched the National Campaign to Minimise Cash Transactions to urge Singaporeans to undertake more financial transactions electronically, so as to heighten productivity, reduce costs and make cashless payments a way of life. This three-month campaign successfully convinced more Singaporeans to switch to receiving their salaries through direct credit to the bank, pay bills electronically via GIRO, and make purchases through the Electronic Funds Transfer at Point of Sale service.
This historical context provides very useful clues to help us understand our relatively slower uptake of newer e-payment services such as mobile payment. Precisely because of our mature financial ecosystem, consumers are well-accustomed to, and very well-served by NETS and credit cards. But how do we explain the fact that cash remains the favoured payment option for small-value transactions such as those in hawker centres, convenience stores and taxis? Why has mobile payment not been more avidly used for such transactions? It is becoming a commonplace to note that in countries such as China, even street peddlers accept mobile payments!
Diffusion of innovations theory offers a valuable framework for assessing the trajectory of an innovation through a given population. This time-tested theory, applied to innovations in sectors as diverse as agriculture, business, and public health, asserts that the rate at which an innovation diffuses through a population is contingent on five key factors. These are relative advantage, complexity, compatibility, observability and trialability.     
Let us first consider the latter three factors. Given the high rate of smartphone penetration in Singapore, mobile payment should be highly compatible with our existing lifestyles. The smartphone has become a veritable appendage, and we are no stranger to mobile interfaces. By the same token, it should thus be extremely easy to observe other people using mobile payments and to witness first-hand the benefits of such payment methods. With most adults equipped with personal smartphones, there is virtually no barrier to trying out mobile payments for ourselves. Hence, compatibility, observability and trialability are not the likely stumbling blocks to greater adoption of mobile payment.
Instead, consumer resistance may be due to the factors of relative advantage and complexity. I have heard concerns even from acquaintances in their 20s and 30s that they do not use e-wallets or mobile payment because they are not confident of their security or reliability. Indeed, the results of PayPal's "Digital Payments: Thinking Beyond Transactions" survey released in August 2017 found that 51% of Singapore consumers surveyed expressed privacy concerns. 63% said that more payment methods meant more confusion for consumers, and 53% found it challenging to keep up with fast-moving digital trends.
Separately, consumers also lament that some mobile payment interfaces are too cumbersome, involving several steps that may yet require more time per transaction than by just paying with good old cash. Overall, there is also the problem of too many mobile payment options in a highly fragmented market. Consumers thus experience cognitive overload and perhaps even choice paralysis. In light of these issues, it seems therefore that mobile payment is relatively less advantageous and more complex as compared to payment by cash or credit cards.
To revisit the factor of compatibility, incongruence with values is another possible cause for resistance to mobile payment. One oft-heard reservation about the shift towards cashless payments is that people will be desensitised to the value of money, and consequently develop reckless spending habits. Such concerns rest on the belief that physically parting with your money gives one the sense of pain and loss, and can help instil frugality. Some parents of young children also feel that the tactility of cash payments teaches them to calculate expected change, unlike e-payments which are pre-calculated and deny them the opportunity to appreciate the value of money.

Such apprehensions, well-founded or otherwise, can be addressed with some critical design interventions. Stored value e-wallets already highlight the amount remaining in the account, and provide a helpful log of all recent transactions. Additional features such as those allowing users to set a savings target for each month can also help to nurture good financial habits including fund management, budgeting, saving and credit management.
Taken together, all these concerns highlight three salient points of action for addressing consumer resistance to e-payments in general. These are trust, design, and communication. The additional consumer protections introduced by the Payment Services Bill and the implementation of the MAS’ E-Payments User Protection Guidelines at the end of this month will certainly help to shore up consumer confidence.
At the same time, however, it is imperative that we pay greater attention to enhancing the design of e-payment interfaces so that transactions can be speedier and more intuitive. Design interventions should also be introduced to address concerns about the negative impact of e-payments on personal financial habits and financial literacy.
Finally, with the burgeoning market in e-payment providers out there, public education efforts must be accelerated to better communicate to consumers the various options, protections and incentives they enjoy. In particular, targeted education must be introduced for the elderly who are less well-acquainted with digital devices and platforms and may therefore be especially anxious about our transition towards a cashless society.
Greater industry streamlining, coupled with concrete initiatives for tackling consumer resistance, are fundamental to overcoming the inertia inhibiting faster adoption of e-payment.
The writer, Prof Lim Sun Sun, is professor of communication and technology and head of humanities, arts and social sciences at the Singapore University of Technology and Design, and a Nominated Member of Parliament