AFTER 10 years of talk and experimentation, Singapore is finally on its way to becoming a cashless society.
The question is, why did it take so long? And more importantly, is it really possible for consumers to go cashless, given that a lot of transactions take place at the grassroots level, where cash, not a card, is the preferred medium of exchange?
Another question: By the time a resident here whips out that multi-purpose card to pay for everything, will the Singapore system have become outdated?
Let me answer these questions in turn. There are some reasons for Singapore's relatively slow move towards being a cashless society.
To begin with, there was the fact that Singapore did not have an established local operator to invest in and build the network.
Then, there was the preference of the authorities here to see how other countries' systems worked out, waiting for the kinks to be ironed out before trying to devise and implement a system here.
And finally, the existing monopolies played a part in stifling progress, hogging their own corner of the market.
Nets (the Network For Electronic Transfers), owned by the three local banks, had retail store transactions pretty much locked up. And EZ-Link had cornered the market for transit payments - those on buses and trains.
With no common language connecting the two, each player had to have its own network of cards and card readers.
This obviously was not a situation that the authorities liked. A variety of proprietary systems would have resulted in high costs all round.
So the Government got the rivals together to hammer out a common standard. Some describe the result as the first government-sponsored system in the world. But now, both cards - Nets and ez-link - can be used for any purchase, whether at shops or on the road.
With a common standard, the market can accommodate two or more operators offering their own all-in-one card, each dangling freebies and reward schemes to woo consumers.
Judging from what the operators have disclosed, they are considering a whole range of proposals to make the cards more convenient for consumers - like providing wireless automatic top-ups that you can sign up for with your bank.
This means no more hopping over to an ATM to top up cards or worrying about being stuck in a car with no value left on the card and an Electronic Road Pricing (ERP) gantry looming.
EZ-Link said its strategy now is to win over users of carparks and the ERP system - markets worth $500 million and $120 million a year respectively, and both hitherto dominated by Nets, said EZ-Link executive director Nicholas Lee.
Nets, on the other hand, wants to strengthen its network of merchants to give itself an edge over the competition by offering consumers more deals.
Though consumers can look forward to carrying fewer cards, does this also mean they do not have to carry cash?
This depends on whether shopkeepers and small retailers think it is worth their while to pay to go cashless.
Some industry players admit it will be a challenge to convince small retailers to buy into the system.
Explaining how the technology works and convincing retailers to pay to maintain the terminals are among the obstacles. Some retailers would wonder if the cost of handling cash might not be lower, depending on the volume of transactions.
Mr Cyrus Daruwala, managing director of research and advisory firm Financial Insights, is optimistic. He reckons that having different players means costs per transaction will probably go down.
In the past, Nets' dominant position meant it was at liberty to set prices for merchants. In September 2007, for instance, it quadrupled its fees. Store owners had to pay up to 1.9 per cent of an item's purchase price, on top of the cost of renting the Nets machine, which is between $40 and $80 a month.
Retailers will not have to worry about renting different machine with the contactless system being designed. One terminal should be able to read different cards.
The Government's 2006 infocomm masterplan set the aim of doubling card-based, e-money and mobile payments from $25 billion then to $50 billion annually by 2010.
Last year, card-based transactions here, including credit cards, amounted to about $38 billion, according to research firm Euromonitor. Cash transactions - consisting chiefly of small payments at coffee shops, hawker centres, wet markets and the like - came to $26 billion.
Nets has said it wants to capture at least $5 billion, or 19 per cent, of this pie. EZ-Link, too, wants a slice.
Industry players estimate it will take another five years to fully implement the common cashless payment standard islandwide, as well as to realise its benefits.
Which brings us to the last question: By the time this technology is fully implemented here, would it have become outdated?
Japan, South Korea, Hong Kong and some places in Europe have gone beyond contactless cards to using mobile phones and even biometric scans to make payments. Spain and Thailand have encrypted identity cards with biometric features.
It would be ironic if shopkeepers and neighbourhood coffee-shop owners here are persuaded to get on board with the current system, only to discover in a few years that they would have to change again.
The hope is that the new standard will be flexible enough to adapt as new technologies and systems appear.
Or people might be forgiven for citing the old adage that cash is king, for all time and for everything.
