Tuesday, September 19, 2017
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Bringing about the end of cash

Posted by pakin On August - 28 - 2017

Imagine a society where cash is no longer the king of payment, but rather an archaic medium of exchange, and electronic transaction is the name of the game. Such imagination is not limited to a Kubrick or a Spielberg film, as digitalisation has turned such futuristic fantasy into reality.

Patchara Jenvitayavechakul, an employee of Kasikorn Business Technology Group (KBTG), starts his working days in Muang Thong Thani on Chaeng Watthana Road like other salarymen. But he has changed his payment habits during the past six months, evidenced by how he rarely takes out his wallet.

Using a quick response (QR) code, Mr Patchara scans a K+Wallet application on his smartphone to pay for his breakfast in the blink of an eye.

He seldom withdraws cash from ATM terminals and only carries his wallet to buy food and beverages or 10-baht items in his office canteen or coffee shops around the office.

Mr Patchara spends around 80-100 baht a day to pay for his meals and drinks at KBTG’s office, where KBank’s financial innovation unit is testing out its QR code payment service, an emerging payment technology.

“I really appreciate digital payment. I no longer have to worry whether I have enough cash or only big banknotes to pay for a dish of rice and curry priced 30-40 baht,” he said.

At another corner in Bangkok on Rama III Road, Jiwamol Kanoksilp, 45, a tech-savvy worker at Bank of Ayudhya (BAY), is using her smartphone with a built-in camera function to scan a QR code at a stall in the bank’s canteen to pay for a food bill.

“I enjoy using the QR code payment and it’s very convenient. It makes me feel like my mobile phone is a wallet. Normally, we see people carry wallets to buy food, but what we see at the banks’ canteen is people are lining up to scan QR codes to pay. It is very easy. We don’t need to take money out of wallets and wait for change,” she said. “QR code payment takes less time than swiping debit or credit cards.”

As a QR code fan, Ms Jiwamol is eager to see the payment method adopted outside of BAY’s headquarters, particularly in convenience stores such as 7-Eleven, as the platform is well-suited for high-traffic offline vendors.

The new habits of these bank employees reflect how digital payments are gaining a foothold in Thailand and increasingly becoming a part of everyday life.

QR code payment development

QR code payment services from both KBank and BAY are in the trial phase, offered in limited areas. The Bank of Thailand is set to roll out standardised QR code payments on Aug 30 to allow consumers to use a single code to process payments through different local banks and non-bank payment networks, while merchants can display one QR code to collect payment when the service is officially launched.

KBTG executive vice-president Somkid Jiranuntarat said the innovative payment technology has received good responses from both users and merchants mainly due to convenience, with no glitches reported during the six-month trial period.

“Even rice and curry stall owners at KBTG’s canteen, some of whom are 60 years of age, and their employees can use K+ Wallet smoothly because of its simple and easy features. Users don’t need to have sophisticated knowledge of information technology,” he said.

KBank, the country’s fourth-largest lender by total assets and a leader in mobile banking payment with over 5 million users, aims to expand the testing of its QR code payment service to other areas such as Chatuchak Market, Siam Square, and Pratunam shopping district.

BAY head of digital innovation Thakorn Piyapan said the bank is testing its e-wallet called “Di Wallet” on a closed-loop basis, starting with letting staff use the platform to pay for food and beverage at the bank’s headquarters.

Di Wallet is a pre-paid system that requires users to deposit money to their accounts beforehand. Users must create their own accounts and passwords on the Di Wallet application installed in mobile phones. They must also enter a password every time to process QR code payments to ensure that others cannot access their accounts.

After ordering food and beverage, users open the Di Wallet application and click on “scan to pay” button. They then proceed with scanning the QR code displayed at the store and entering the purchased amount, followed by tapping on the purchase icon to deduct money from user accounts to transfer to the merchant’s.

So far testing has been running smoothly and it has received positive feedback from both users and merchants, said Mr Thakorn, noting that the bank plans to expand its digital wallet service to the flea market near the bank’s head office on Rama III Road.

Despite user-friendly QR code payments, banks still need to further educate vendors on the benefits of digital payment. Banks should allow these merchants to open savings accounts at any branch to offer as much convenience as possible, he said.

BAY is developing a credit card-based QR code payment, the features of which are more complicated and need to be developed further in the next phase. Credit card-based QR code payments would be an ideal fit for supermarkets, department stores and larger scale merchants.

Electronic know-your-customer (e-KYC) technology is also necessary in order to transform a cash-based society to a cashless one.

The state-owned Government Savings Bank (GSB) is the only financial institution in Thailand that has commercially rolled out QR code payments — MyMo Pay — which is a debit QR code payment system similar to Alipay and WeChat Pay, and MyMo My Card — a QR code-based ATM withdrawal system.

GSB president and chief executive Chatchai Payuhanaveechai said the number of customers using this service is unclear, as it is in an infancy stage, but it is expected that more bank customers will come to use the service because of its convenient features.

“GSB stands ready to roll out a full-scale QR code payment system in accordance with the standardised QR code set by the Bank of Thailand. We expect to be the first bank to do so with all the systems in place,” he said.

Mr Chatchai said there are 1.5 million customers using its mobile banking application “MyMo”, with the number expected to rise to 2 million by the end of this year.

Processing cash withdrawal transactions through a QR code also helps eliminate the risk of card skimming at ATMs or other machines, which should make customers more comfortable in using the applications over electronically-embedded plastic cards, he said.

Mr Chatchai expects 500,000 customers to use MyMo My Card service by the end of this year.

Promising signs of e-payment

Thanks to the national e-payment initiative, digital payments have grown at a faster pace and have played a greater role in daily purchases in recent years.

According to the Bank of Thailand’s data, e-payment has taken off in Thailand with transaction value increasing at a compound annual growth rate of 11.4% over 2010-16. In nominal terms, e-payment transaction value nearly doubled to 328 trillion baht last year from 172 trillion in 2010.

In terms of number of transactions, e-payment rose more than double to 3.21 trillion baht last year from 1.13 trillion logged in the previous six years.

For PromptPay usage, money transferred through the service hit 105 billion baht since the service commenced on Jan 27.

As of Aug 10, PromptPay registrations that linked savings accounts with citizen IDs and mobile phone numbers totalled 32 million. As of Aug 13, 45,379 juristic entities signed up for PromptPay’s business-to-business (B2B) service, up from 28,500 recorded at the end of April.

PromptPay is an online money transfer service that allows users to send money to different banks or the same bank in different zones free of charge for up to 5,000 baht per transaction — part of the four-pronged national e-payment scheme designed to transform Thailand into a digital economy in line with the Thailand 4.0 model. Other measures include e-tax, electronic card and electronic data capture (EDC) expansion, as well as e-welfare and subsidies.

Even though the plan to install 184,000 card-swiping terminals at merchants across the country at the end of June is behind schedule, installers voiced confidence that the 560,000 EDC devices would meet the March 2018 deadline. With the widespread availability of EDC terminals, the government hopes it will become a boon for card spending.

The contact-less Rabbit card is another e-payment platform, with 8 million cards in circulation. More than 10 million people are estimated to reside in Bangkok and its vicinity. The Rabbit card, which is used to pay fares on the skytrain, has spread its tentacles to fast food chains, restaurants, convenience stores and supermarkets.

Bangkok Smart System (BSS) managing director Ratchanee Saensinchai said the number of Rabbit card users increases around 20-30% annually, with card users expected to reach 9 million at the end of the company’s financial year, which was in March 2017.

BSS is the operator of Rabbit card.

She said transactions made through Rabbit cards amount to 40 million baht per day, of which 90-95% is used to pay for public transit and the rest for retail transactions.

Transactions made through Rabbit cards were at 10 million baht per day when the card was launched in 2012. Card transaction value expanded by 15-20% per year because of the extension of skytrain lines, promotional campaigns for retail transactions, and an increased number of card readers, said Ms Ratchanee.

The number of Rabbit card readers is expected to hit 6,000 by year-end 2017, up from 4,000 at present. Most of the card readers have been installed at small-ticket merchants such as restaurants, cafes, food courts and convenience stores, she said.

Ms Ratchanee said customers have become more comfortable with paying for larger-ticket items through Rabbit cards in supermarkets, with an average transaction of 500 baht.

“As customers become more comfortable using this mode of payment, which has proven to be safe, the number of users is expected to continue to rise,” she said.

As the government has made great strides in promoting the national e-payment scheme, consumers have become more familiar with digital payments and Rabbit cards have risen in popularity.

Cash will remain king for a while yet

With high internet penetration and rising smartphone usage, the government’s push to go cashless and the trend of digital payment options have given a big boost to e-payment in Thailand. But a spate of hurdles still remain for the country’s transition to a truly cashless society.

These obstacles include a deep-rooted cash culture, the reluctance of people who have less sophisticated technology in adopting new payment options, and an entrenched fear of cyberattacks.

Against the backdrop of the fast-growing digital payments changing the payment landscape, cash still dominates the payment system in Thailand, constituting some 80% of payments.

“I’ll certainly use QR code payments if the service is commercially rolled out as it is convenient. However, I may restrict e-money purchases to small-ticket items as it is difficult to top-up accounts with significant amounts of money,” said Ms Jiwamol.

She said e-payment tends to be a worthy substitute for cash, but she plans to keep some paper money in her purse because very few small merchants, particularly street vendors and mom-and-pop stores, accept such non-physical payment.

 

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