Gen Z--the alpha of new payment trends

The younger generations are quickly embracing digital payment methods, leading the shift to building a digitally connected society.

Digital payment economy in Singapore rapidly grows

Currently, over three-quarters of Singapore consumers (76%) use credit or debit cards for payment. More than half of the population utilises funds transfer service PayNow (55%) or bank transfers (55%). About a fifth are also using e-wallet service GrabPay (22%) and buy now, pay later platforms (21%).

A research titled I Want To Pay That Way done by Xero, the global small business platform, reveals that there is a growing trend towards digital payments in Singapore, driven by strong government support and initiatives aimed at building a digitally connected society.

Younger generations are leading the way, quickly embracing new digital payment methods. PayNow is the preferred digital payment method for 68% of Gen Z consumers in Singapore, with about a third (29%) also using GrabPay. The research showed that 30% of Singapore consumers only carry their mobile phones to pay when shopping, notably higher than the global average of 21%

“Singapore is at the forefront of building a robust digital payment landscape, aligning with its broader digital economy and Smart Nation goals. While a supportive regulatory environment and complementary initiatives are driving digital payment development and adoption among Singapore’s small businesses and consumers, targeted support to help small businesses adopt more payment options will also be crucial,” Koren Wines, Managing Director, Asia, Xero said.

Why go digital?

Nearly nine in ten (87%) small businesses in Singapore say they have benefited from adopting new payment methods in the last 6 to 12 months, with key reported advantages including reduced time to be paid (43%), retaining more business (42%), and increased sales (41%).

Many small businesses in Singapore are optimistic about future or emerging payment methods. These include biometric authentication methods such as fingerprints or facial scanning (36%), bartering marketplaces/apps (33%) and augmented reality (33%). About a third (31%) have expressed excitement about implantable payment chips, a much higher figure than small businesses in countries like Australia (7%) and New Zealand (9%) included in the research.

"Previously, we were drowning in a sea of paper," said Goh Kok Wee, Chief Development Officer, Yeap Transport. "Some school parents were sending in cheques, some were paying cash and reconciling all these payments was a nightmare. We knew we needed a change, but finding the right solution for an SME in our industry wasn't easy." 

"With Xero and CardUp, we've been able to cut down our reconciliation process from weeks to days," Goh explains. "It's not just about saving time; it's also about gaining clarity. We now have real-time visibility into our finances, which is crucial for making informed business decisions."

A long way to go but there is progress

Despite trends indicating a shift towards a cashless society, physical currency remains a preferred payment method for a significant portion of Singapore’s population. Nearly eight in ten (79%) Singapore consumers use it for transactions, highlighting its prevalence in everyday life. However, half (51%) of local small businesses no longer offer it as a payment option, making small businesses in Singapore the least likely among the countries surveyed to accept cash payments, despite having the highest proportion of consumers who opt for this traditional method.

However, nearly nine in ten (87%) small businesses in Singapore say they have benefited from adopting new payment methods in the last 6 to 12 months, with key reported advantages including reduced time to be paid (43%), retaining more business (42%), and increased sales (41%).

As a commitment to delivering on its business strategy, Xero is building payment solutions to make it easier for small businesses to make and collect payments more seamlessly, while helping them to maintain a healthy cash flow.

Goh offers this advice to other SMEs in Singapore: "It's crucial to invest in a reliable accounting solutions provider with great after-sales service that doesn’t break the bank. Cheaper alternatives may seem appealing, but they can lead to costly upgrades or even system replacements. Avoid being 'penny-wise and pound-foolish'; focus on managing both one-time and recurring costs to maintain functionality without eroding profits."

Bharathi Ramavarjula, SVP of Payments, Xero, said: “Understanding how different consumers prefer to pay and giving them the flexibility to pay the way they want, will help small businesses get paid faster and grow their revenue. To make it easier to collect payments, Xero is providing small businesses with more ways to get paid.”