5 Major Payment Methods in Singapore
As Singapore’s e-commerce sector grows, understanding the intricacies of various payment methods is crucial for businesses aiming to thrive in the digital marketplace. To explore the significance of diverse payment methods, read on to find out what the top 5 Major Payment Methods are in Singapore, and how to decide which is the best for your business.
Payment methods refer to the different means through which transactions are processed between buyers and sellers in online transactions. These methods include a wide array of options, from traditional credit and debit cards to emerging digital wallets and online banking transfers. Each method comes with its advantages and considerations, influencing how your business operates in Singapore.
1. Cards
Card payments are payments done using a debit or credit card, that is used to withdraw funds for payment of goods and services. The funds are directly deducted immediately (debit), or delayed (credit), from the buyer’s account, depending on the type of card.
BenefitsThey are fast and efficient, requiring only a short time for your business to receive the money. The process of payment does not take long. The buyer only has to key in their credit card details and go through a security card checkout process. They can also simply tap or insert their card into a card reader. This ensures that payments are secure, as it provides for advanced encryption and fraud detection, protecting your business. Here are the major cards used in Singapore:
- Visa
- MasterCard
- American Express
- UnionPay International
Some considerations that come with card payments are the need for a card reader. Card readers can differ in cost, according to the type of reader and the company manufacturing it. Fees may also be charged monthly or annually. Additionally, transaction fees are also required by the business to process customer payments, which also depend on the provider of the cards.
2. Bank Transfers
Bank Transfer refers to the transfer of funds between two banks, from one to another. It can be done online or mobile, requiring the customer to key in their bank account details, the amount they want to transfer, and the date of payment.
BenefitsAs bank transfers occur between two banks, it is secure and safe, and cannot be intercepted by other parties. Hence, protecting the business from being susceptible to fraud. The majority of bank transfers in Singapore are facilitated by PayNow, which allows transfers among the following major financial institutions and more:
- DBS Bank/POSB
- OCBC Bank
- United Overseas Bank (UOB)
- CitiBank Singapore Limited
- HSBC
Since bank transfers happen manually, there is a possibility to be susceptible to human error. For example, if the account details or amount transferable is being keyed in incorrectly, it is not possible to reverse the transaction and will be very difficult to retrieve the funds transferred. Banks also do not control the transactions, and transfers lack protection against fraudsters.
3. QR Code Payments
QR Code payments take place when customers scan a QR code using their smartphone camera. They will either be led to confirm payment, or to a payment page where the customer chooses their method of payment.
There are 2 main types of QR codes, namely static and dynamic. Static QR codes allow the customer to key in the amount manually. Dynamic QR codes specify the amount paid by the customer, as pre-filled by the merchant.
BenefitsQR code payments do not require very specialised equipment, unlike card payments, which require a card reader, reducing the costs of operations. This makes implementation easier and more efficient as well. QR codes are fast and convenient for both the buyer and seller, increasing customer satisfaction and revenue. It is also secure due to the smartphone’s security features. In Singapore, the Singapore Quick Response Code (SGQR) launched in 2018, was the first of its kind to unify various QR codes under a common one.
ConsiderationsWhile QR codes have many benefits, they are not without faults. They are reliant on having good network connectivity, as poor connection may lead to failure of transactions. Other than this, QR codes are susceptible to fraud and fake QR codes, leading to phishing and scams.
This can put customers at risk and affect business operations. Customers who do not own smartphones or lack access to the technology will also face difficulty in adopting QR code payments.
4. Digital Wallets
Digital Wallets are digital versions of the physical wallet, containing money on digital apps or smartphone platforms. They can be used to send money to recipients, or by holding their smartphone against the seller’s card reader for payment.
BenefitsDigital wallets make paying faster and more convenient. Customers do not have to bring around or search through their physical wallets during payment. This leads to higher checkout conversions for businesses, increasing the smoothness of transactions. Digital wallets are also equipped with security features and advanced security technologies, protecting customers’ information and reducing fraud for merchants. Hence, mobile wallet usage has been on the rise in Singapore, with the following being the most used:
- GrabPay
- FavePay
- Singtel Dash
- ShopeePay
However, accepting payment by digital wallets means businesses require certain technology and equipment, including a payment gateway, increasing costs. As technology and features of the wallets evolve, merchants also need to update integrations, to stay up to date and reduce disruptions. Digital wallets also have higher interchange fees as compared to card payments, with possible processing fees as well.
5. Buy Now, Pay Later (BNPL)
Buy Now, Pay Later (BNPL) allows customers to pay for goods and services in instalments without interest charges, instead of paying the full cost upfront. Customers will then repay a certain amount every month.
BenefitsMerchants receive the full payment upfront, instead of in instalments, as the customers deal with the BNPL provider rather than the merchant. This protects merchants from repayment risk and fraud. It also puts businesses at ease, as the BNPL provider takes over the risk from merchants. BNPL provides a more flexible payment arrangement for buyers, incentivising them to make purchases, and helping businesses target a wider customer base. It is less intimidating for customers to make bigger one-time payments, increasing conversion rates and improving orders overall. Here are some of the major BNPL providers in Singapore:
- Atome
- Grab PayLater
- SPayLater
That being said, here are some considerations for businesses when adopting BNPL payment arrangements. BNPL providers do charge higher fees to merchants based on a percentage of the customer’s purchase, in comparison to debit and credit card companies, so it may not be beneficial for businesses just getting by. It might also indirectly affect the business image if the customer had a bad experience with a BNPL provider, resulting in the customer going straight to the merchant and blaming them.
How to Select the Best Payment MethodSo how can businesses select the best payment method for their business? Businesses can consider the cost of operations if a certain payment method is chosen. For example, if card payment was chosen, businesses will need to consider the processing fees involved in relation to the profits, admin and resources needed to run the business.
Businesses can also look at customer preferences, to analyse what are the preferred methods of payment. By adopting them, they can appeal to the ease and convenience of customers.
Another thing to consider is how to minimise failed payment rates, which can be common among credit card payments. It not only creates inconvenience for customers, disincentivising them from returning to the business but also takes time to deconflict and recover payments.
ConclusionChoosing the right payment methods for your business in Singapore is pivotal to enhancing customer convenience, optimizing operational efficiency, and fostering trust in online transactions. Whether you’re considering credit cards, digital wallets, or other emerging options, Payment Options stands ready to support your integration process.
Explore our resources and services on our website to discover how we can help your business navigate and thrive in the evolving e-commerce landscape.
