Finance
Singpay
10 February 2025
Reimagining Digital Payments in Singapore
Problem statement
As per UOB’s website (opens in new tab), from 2026 onwards, businesses will have to pay $0.20 per transaction to collect PayNow payments. Other banks may charge similar fees. How might we lower the cost of doing business in Singapore through ensuring competitiveness of our e-payments ecosystem?
Objectives and product goals
Research what a competitive and cost-effective payments ecosystem could look like in Singapore
Build a prototype for such an ecosystem
Research and approach
Field Research
Areas: Albert Food Centre, 85 Fengshan Market
Hypothesis: Fixed $ transaction costs would disproportionately affect merchants with small-value high-volume transactions.
Key Findings
Many hawkers currently use their personal Paynow QR codes to accept payment - will be unaffected by the changes in fees for Paynow Corporate
Hawkers are not required to set up a Corporate bank account according to NEA/SFA’s process, therefore will not be subjected to any future possibility of the corporate transaction fees as well
Interoperable QR code-based e-payment systems currently exist (i.e., SGQR+) & allow merchants to receive incoming funds into a single bank account of their choice
For merchants that are using other e-payment systems (i.e. SGQR+) and are aware of the upcoming 0.5% charges, they did not express a significant concern regarding decreasing profit margins
Field Demographic: The majority of hawkers we spoke to were based in Albert Food Centre, where the population was predominantly elderly >50, and prefer using cash payment methods.
Conclusion + Pivots
As many hawkers and merchants were observed to have SGQR+ QR codes available at their storefront, or have mentioned that they are aware of this, our team decided to do a deep dive into SGQR+ as an alternative e-payment system to investigate the competitiveness, efficacy and cost-effectiveness of this solution.
Policy Research
Existing Landscape
According to our research, Banking Computer Services Pte Ltd (BCS) aka NETS, manages and operates the national clearing and payment infrastructure in Singapore, including Fast And Secure Transfers (FAST), Interbank GIRO, eGiro, Cheque Clearing, PayNow and SGQR Central Repository.
For SGQR+, there are 2 main tracks: (I) Master Merchant Acquirer By NETS; (II) Interoperable Switch By Liquid Group
(I) Value proposition lies in consolidating all the participating issuers and merchants under a merchant acquirer (NETS), which provides an interoperable QR that allows merchants to accept multiple payment methods & customers to use their preferred payment method. It also opens up possibilities of cross-border payment through onboarding of international schemes such as Alipay, Duitnow, etc.
(II) Value proposition lies in the network switch which facilitates e-money "push" transactions and card scheme-linked "pull" QR payments like Visa and Mastercard. Similarly, it also fulfils the core proposition of allowing merchants to accept multiple payment methods & enabling customers to use their preferred payment method.
While the innovation factor is prominent in SGQR+ scheme, our team noticed that BCS still manages and operates a critical portion of Singapore’s e-payments infra system, and also is the sole merchant acquirer for SGQR+, which leads us to the following questions:
How does MAS collaborate with industry players?
With multiple players and routes, would this be considered as true interoperability?
What is MAS’s view on the current market landscape and it’s competitiveness?
What levers does MAS currently employ in ensuring affordability of e-payments solution for merchants and consumers?
How would SGQR+ differ from SGQR, other than the 2 new tracks rolled out for POC? When was it conceptualised, and how did the need arise? Who were the key stakeholders involved in the planning and technical development?
Our call with an MAS Officer
The vision is to create an e-payments society, where not only convenience thrives, but also competition and innovation. MAS collaborates with the financial industry and international partners to shape financial ecosystem.In our call with Brian Yee (brian_yee@mas.gov.sg) from MAS on 24th Jan 2025, he shared more details on the questions above:
MAS typically would have a long-term roadmap for the strategic development of Singapore’s financial landscape, and share these with the Payments Council and Singapore Fintech Association, which connects industry players within Fintech.
By utilising this approach, MAS achieves the goal of promoting competition and innovation through setting high level strategic goals, but leaving it to industry experts to come up with their own solutions.Interoperability is considered to be a single relationship?? SGQR can be envisioned as a sticker book, where it serves to be the common platform linking various e-payments solutions together for both users and merchants. Meanwhile, this still creates space for industry players to enter and innovate.
Within the fintech space, it’s inevitable that a few major players will arise from the competition, but the current SGQR+ scheme leaves the doors open to other players that may potentially bring new innovation and serve as a good check for dominant players.
On top of prioritising competition amongst players, there’s also the priority of reliability of systems. With more schemes and solutions present, we can mitigate risk for single point of failure for Singapore’s digital payments.For SGQR+, NETS is the operator of FAST payment rail, therefore they are the de-facto operator for SGQR+ track 1 scheme. MAS’s policy is to regulate cost of e-payments solution so that it doesn’t get passed onto consumers. For BCS, they are charging based on a cost to recovery model. In cases of rising cost, MAS would consider providing funding or subsidies. While there are other alternatives that MAS is considering, it cannot be disclosed to us as of now, and will be shared in an upcoming report in 2025.
For hawkers and heartlands merchants, they are currently onboarded with subsidies and therefore do not need to pay any costs. These subsidies are provided by IMDA, under Hawkers Go Digital Scheme, in collaboration with ESG, HDB, JTC and NEA.
More about SGQR+ and Hawkers/Heartlands Go Digital
SGQR+ (NETS Track)
Benefits
Interoperable QR Code: helps merchants accept e-payments from wide range of payment providers
Seamless User Experience: merchants and users can use their preferred payment providers for receiving and initiating e-payments
One-stop Reconciliation: NETS Merchant Portal offers integrated reports and validation for merchant transactions and settlement
Concerns
All SGQR+ transactions flow through NETS for clearance. How much regulatory control does MAS over how much NETS can charge for operating SGQR+
International Counterparts
Malaysia (DuitNow QR)
Centralised e-payment infrastructure: owned and operated by central bank, with different merchant acquirers (i.e., payment providers) servicing merchants
Real-time payment clearance and settlement
Transaction fees (on merchants): around 0.25%/incoming transaction but differs between merchant acquirers & tiered based on business size (often waived for small businesses);
Indonesia (QRIS)
Centralised e-payment infrastructure: owned and operated by central bank
QR code-based payment system relies on SKNBI transaction clearing system: handles retail payments and smaller-value transactions. final net settlement via bank transfer (similar idea to proposed Singpay)
Transaction fees differ by size and type of business
Regular Business: Micro (0.3%); Small, Medium, Large (0.7%)
Special: Education (0.6%), Petrol (0.4%), People-To-Govt (0%)
As of 1 Dec 24, MDR waived for transactions to micro-businesses up to Rp 500k (~S$41)
Thailand (Promptpay QR)
Centralised e-payment infrastructure: owned and co-operated by central bank
Transaction fees
Free for digital transactions; fees incurred for ATM banking
For PromptPay Business (where funds are linked to tax ID rather than bank account), tiered fees apply for outgoing fund transfer: <฿100k=฿10 fee; >฿100k=฿15 fee
Solution overview
We built a prototype for a central payments authority which acts a central ledger, and routes payments between different payment providers (like e-wallets/banks). The idea is that having a central routing system:
Keeps costs low through simple system design and automating manual processes like reconciliation
Makes the ecosystem more competitive by reducing merchants’ and consumers’ switching costs between payment providers, as all payment providers would be interoperable
Reduces the overhead for merchants having to track income streams from multiple payment providers
Outcomes and impact
Our prototype illustrates a different approach to building Singapore’s ecosystem: having the Government build a free-of-cost, interoperable base for the private sector to innovate on, instead of leaving system design as well as pricing for money transfers purely to the private sector
Having a government-owned central transactions ledger that is transparent and immutable: increases confidence in a deferred net settlement basis e-payment system, which has the potential to reduce infrastructure and transaction costs
Next steps and future vision
Take this forward with policy makers and MAS to discuss the best way moving forward without disrupting the banking industry.