In the ever-evolving landscape of digital payments, interoperability has emerged as a critical factor in Singapore’s journey toward an innovative, inclusive, and efficient payment ecosystem.
Quick Response (QR) code payments have swiftly emerged as the preferred payment method for businesses in the Lion City.
Implementing an interoperable QR code payments infrastructure in Singapore promises to facilitate smoother, more secure, and accessible transactions, benefiting both businesses and consumers.
In addition, it has the potential to simplify daily operations and cater to the payment needs of micro and small-scale merchants, which are pivotal for a thriving business landscape.
The rise of cashless payments in Singapore
With its well-developed financial infrastructure and widespread access to financial services, Singapore has witnessed a surge in cashless payments.
Debit, credit cards, and digital wallets now constitute over 75 percent of Singapore’s transaction methods. Cards account for 57 percent of point-of-sale transactions, while digital wallets make up 18 percent, with cash payments at 19 percent.
QR codes have become a popular alternative for cashless transactions, particularly among micro and small-scale merchants in Singapore. These businesses have found QR payments a convenient and cost-effective solution, which can be passed on to customers through discounts.
Consequently, QR-enabled transactions in Singapore have witnessed remarkable growth, with a Compound Annual Growth Rate (CAGR) of 72 percent between 2017 and 2022. This upward trend is projected to continue, with QR transactions expected to grow at a CAGR of 36 percent from 2022 to 2026.
Streamlining payments with SGQR
Singapore has made significant strides in streamlining payment processes for businesses and consumers. The widely adopted Singapore Quick Response Code Scheme (SGQR) has provided an affordable and infrastructure-light solution for merchants nationwide to accept swift and secure digital payments.
However, as businesses aspire to expand and serve a broader range of domestic and international customers, the demand for real-time interoperable QR payments becomes increasingly crucial.
Introducing the concept of an interoperable SGQR (SGQR+), Singapore aims to address current challenges merchants face and open new avenues for digital inclusion. SGQR+ represents a commitment to nurturing innovation, promoting ease of doing business, and fostering a dynamic economy.
To understand the feasibility of SGQR+, a Proof of Concept (POC) was conducted by EY in collaboration with Banking Computer Services (BCS), Singapore’s key payment network operator, and the support of the Monetary Authority of Singapore (MAS).
The evolution of SGQR
The adoption of QR payments led to the proliferation of multiple QR labels in retail establishments, complicating the payment process for both consumers and merchants.
The Infocomm Media Development Authority (IMDA) and MAS introduced SGQR to address this issue in September 2018. SGQR consolidated multiple QR payment types into a single standardised QR code, simplifying cashless transactions.
By September 2023, SGQR had been embraced by 31 financial institutions and over 239,000 merchants in Singapore.
SGQR has brought numerous benefits to consumers, merchants, and payment providers, including consolidating multiple QR codes into a single label, offering various cashless payment options, and increasing consumer confidence in QR payments.
However, it has limitations, such as merchants needing to form contracts with multiple payment providers and the lack of true interoperability between payment schemes.
Building upon SGQR, SGQR+ represents the next generation of interoperable payments for merchants. SGQR+ is designed to align with Singapore’s vision of a seamless, accessible, and interoperable payments ecosystem.
Both SGQR and SGQR+ payloads will coexist within a single SGQR label, allowing merchants to choose between basic and interoperable QR payment schemes based on their needs.
SGQR+ enables merchants in Singapore to accept multiple payment schemes through a single acquirer, streamlining the transaction process. It eliminates the need for merchants to manage relationships with numerous acquirers and perform separate reconciliation processes.
This innovation promises a more convenient and efficient payment experience for both businesses and consumers.
Interoperable QR Payments in other countries
Interoperable QR payments have gained momentum globally, with countries like India, Thailand, Malaysia, Indonesia, and the Philippines embracing this transformative trend.
These nations have implemented systems such as India’s UPI, Thailand’s Thai QR, Malaysia’s DuitNow QR, Indonesia’s QRIS, and the Philippines’ QR Ph, all aimed at fostering seamless and inclusive digital payment ecosystems.
These interoperable QR payment solutions promote ease of transactions, reduce fragmentation, and enhance financial inclusion, aligning with the evolving preferences of businesses and consumers worldwide.
The path forward
The SGQR+ pilot will be limited to selected merchant outlets in Districts 16 and 17 of Singapore throughout November 2023 and coinciding with the Singapore FinTech Festival (SFF) 2023. Following the Proof of Concept (POC) for SGQR+, feedback from participating merchants and payment providers will be crucial in assessing market demand for the solution.
MAS will use this information to determine the appropriate commercial and technical arrangements for the potential implementation of SGQR+. Collaborative efforts are underway to explore the technical feasibility of incorporating scheme card payments into SGQR+.
The implementation of SGQR+ holds the potential to revolutionise Singapore’s payment landscape, offering consumers and merchants a wide range of payment options while enhancing the overall payment experience.
Additionally, it may play a pivotal role in promoting more excellent regional payments connectivity streamlining trade and investment activities in the Southeast Asian region.
If successful, it will benefit the nation and serve as a pioneering example on the global stage.