Visa Singapore is one of the biggest brands in the world with adverts present at almost every major international sporting competition that I can think of. Together with MasterCard, American Express and JCB, Visa has been the dominating method of payment that the masses have known for decades. As a company, it can be said that Visa’s investment moat is second to none in the payment networks sector. Visa and Visa Singapore will be used interchangeably in this article for keyword purposes. It doesn’t mean that Visa is a Singapore company.
In our increasingly connected world and with the government driving the country towards a cashless society, there has been a lot more new ways to make payment such as Google Pay, Apple Pay, PayNow, GrabPay DBS PayLah, PayPal and so on. With the introduction of so many avenues of payment, it seems like the investment moat for these traditional old boys is being disrupted. Moats do not last forever, perhaps the moats of these companies is starting to be drained? Or perhaps, it is already drying?
Disrupting Visa Singapore Investment Moat – Bank transfers
- Telegraphic Transfer
In Disrupting Visa Singapore Investment Moat part 1, the different methods to transfer money through a bank were discussed. We shall start off the discussion in this article with a new local service, PayNow.
PayNow is a new initiative by The Association of Banks in Singapore, that provides allows us to transfer and receive funds through our NRIC or mobile phone numbers. Consumers that have bank accounts in the 9 participating banks will be able to transfer funds easily.
For corporate, there is Corporate PayNow which allows consumers and corporate to send and receive funds using a QR Code or the UEN number.
In 2017, PM Lee has announced the government’s drive to turn Singapore into a cashless society. We can consider PayNow as a useful part of the government’s plan to go cashless as it is a genuine alternative for cashless initiatives. By incorporating PayNow with corporates and tapping on the FAST network, small merchants are provided cashflow liquidity, which is an important aspect for SME.
Allows us to receive our SG bonus earlier. (SG Government, thank you and you are welcomed!!!)
No cost for consumers.
Small cost for large amount transfers for corporates. Good for transferring larger amounts.
Immediate transfer as PayNow taps on the FAST network.
Provides GIRO arrangement as well.
There is no need to go through the hassle of setting up payee details through internet banking. Making it an easy way to send small funds to family and friends.
Here’s a video about Paynow if you still don’t know what it is.
No installment available.
Only available for SGD transfers
Not a viable option for all merchants. Although it is free for consumers, corporates has to pay $0.20 to receive funds from their customers. Imagine you are a hawker selling wanton noodle for $3. Here are your options to collect payment;
- Simple and traditional. One pay, one receive. End of story.
- NETS charges about 1% of the transacted amount, therefore, hawker pays $0.03.
- Visa and MasterCard charges about 3% of the transacted amount, therefore, hawker pays $0.09.
- $0.20 fee to receive.
The answer is straightforward isn’t it.
Disrupting Visa Singapore Investment Moat – How it disrupts?
Simply insert the NRIC/mobile number/Corporate UEN number/scan QR code and sent. This is an initiative that directly bypass the payment processor’s network. However, this hasn’t stopped me using Visa PayWave at McDonald’s and I do not find any initiative to do so. In order to pay for my food using Visa PayWave, this is what I have to do
- Take out my card
In order to pay using PayNow, I have to
- Take out my phone
- Unlock my phone
- Log into PayNow, which is also my Internet Banking app
- Scan their QR code or key in the UEN number and key in the amount
PayNow makes it easier for me to send and receive funds to my friends, however, it does not necessarily makes it easier for me to make a purchase. It is a useful service to have, however, exactly how can it disrupt payment processors like Visa is unknown.
As of current, PayNow is not a huge disrupter to Visa, MasterCard, American Express and JCB. This is because PayNow is a localised service and the rest serves the international market. Although payments in Singapore can be made by bypassing them, I believe that the all can co-exist in our market as all have a role to play.
Adding on, one advantage that Visa, MasterCard, American Express and JCB have is actually their presence on credit cards. The availability to pay via instalments is something PayNow currently cannot provide. Many Singaporean would likes to break up their purchase of mid-ticket to large-ticket items into instalments. (eg. Paying for your new television or comfy bed by instalments.)
Now begs the question, given that PayNow is an initiative by the banks, what is stopping them to create a instalment system for PayNow? I don’t know, perhaps someone can enlighten me on this. However, currently as we know, instalments are not available for PayNow.
Therefore, even with the emergence of PayNow, card payments utilising the network of NETS/Visa/MasterCard/American Express/JCB remains relevant.
We should also take note that the Association of Banks in Singapore has reviewed that PayNow will not replaced but instead will complement existing fund transfer systems and existing fund transfer systems will still be part of the game.
Disrupting Visa Singapore Investment Moat – Enhanced payment system
- Google Pay
- Apple Pay
- Samsung Pay
These are what I called enhanced payment systems. In recent years, digital wallets that allows you to pay for your purchases using your mobile phones. It works using the near-field communication (NFC) functions of your smart phone and they tap on the contactless payment functions that is readily available now. Instead of tapping your credit/debit card onto the credit card terminal, you tap your mobile phone on the credit card terminal.
The most popular systems out there in the market are Apple Pay, Google Pay and Samsung Pay. Three companies that has a huge pedigree in their own markets comparable to Visa/MasterCard/American Express/JCB.
How it works is that users will store their credit cards onto these apps and when they want to make a purchase, they will unlock their phones and tap their phones onto the credit card terminal just like how they would tap their credit cards.
- When you lose your wallet, thieves can use your credit cards immediately. With your credit card stored on your mobile phone, thieves will have to hack onto your mobile phone before you wipe your data remotely, before they can use your mobile phones.
- Credit card details are not shared to merchants, reducing the risk that merchants lose your credit card details in credit cards hacks/frauds.
In Singapore, contactless payments are limited to within $100, except UOB. Therefore you are unable to make use of enhanced payment system for large purchases, unless you are a UOB user.
Disrupting Visa Singapore Investment Moat – How it disrupts?
Google Pay, Apple Pay and Samsung Pay actually do not disrupts the operations of Visa, MasterCard, American Express and JCB. Instead they actually enhances them.
In this second article, we can see that despite the emergence of PayNow, their uptake and usage is not widespread wide yet. Even if it is widespread, it is only limited to the local market in SGD. Traditional payment networks like Visa, MasterCard, American Express and JCB are still relevant. In the case of Google Pay, Apple Pay and Samsung Pay, they merely enhance the usage of card payments which definitely suits the needs of traditional payment networks.
Therefore, from the first article until now, nothings comes close to severely disrupt Visa’s investment moat. The closest we get is PayNow’s payment function, which taps on its ability to transfer funds. Nonetheless, PayNow is designed to complement and not disrupt Visa.
In the next article, we will look at digital wallets that have successfully annihilate traditional payment networks from their market as well as online payment methods.
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