Going cashless? Over half of work permit holders don’t have bank accounts

In early August 2017, it was reported in various media that public transport will be going cashless by 2020.

By 2020, commuters travelling on Singapore’s transport system will no longer need to use cash or top up stored-value cards to pay for rides, said the Land Transport Authority (LTA) and TransitLink in a joint press release on Friday (11 August).

— Yahoo News, 11 August 2017

“… will no longer need to use cash” can also be read as “… will not be allowed to use cash.”

Cash top-up services at Passenger Service Centres will gradually be removed from 1 September 2017. The first 11 stations to have the cash top-up services removed will be Admiralty, Bedok, Bukit Panjang, Buona Vista, Farrer Park, HarbourFront, Hougang, Lakeside, Pasir Ris, Serangoon and Yew Tee.

Meanwhile, there will still be cash top-ups available at existing GTMs at all train stations, as well as at convenience stores such as 7-11 and Cheers.

Over the next few years, LTA and TransitLink will progressively remove cash payment options for public transport transactions, including fare payment on buses and stored-value card services at train stations.

— ibid.

LTA wants commuters to use account-linked payment systems. Yahoo reported that it is now piloting such a system with Mastercard.

The problem with account-linked systems is that the individual needs to have a bank account. Immediately, TWC2 can foresee a huge problem for foreign workers, for in our experience, half or more of them do not have one.

We did a study in early 2016 (Link), Out of 301 respondents, 166 (55.1%) had received their salaries in cash. Virtually all of these workers — mostly from the construction and marine sectors — would not have bank accounts.

In the light of the latest news, we quickly did another survey. Conducted on the evening of 24 August 2017, we polled 356 men who had come to TWC2 as a result of worksite accidents. No doubt the sample is drawn from TWC2 clients, but by limiting the study to those who had met with an accident, we believe the sample to be a good approximation of the larger population of construction and marine workers. The occurrence of an accident is an independent variable from a company’s payroll practices.

Out of the 356 men polled, 195 (54.8%) said they were paid their salaries in cash. 142 (39.9%) said they were paid through their bank accounts. The remaining 19 men (5.3%) had more complicated answers, which will be discussed in a footnote.

The percentages obtained in this study are remarkably similar to the percentages obtained in the earlier study, when, given the passage of time, the respondents have fully turned over. We were polling a different set of workers this time around. This gives us high confidence in our result.

During the study, we spoke at greater length with a few workers who had bank accounts. We asked them to describe how they opened an account. Their recollections were almost identical. They said they were brought to a bank (not of their own choosing) by their boss or company manager who did the paperwork for them. The boss or manager also brought along the workers’ passports for the bank to verify. After opening an account, the worker got a bank card, but the boss or manager continued to retain the passport.

In fact, it is extremely common for companies to hold workers’ passports when this is actually illegal.

We also came across a report by KPMG, titled “Singapore Payments Roadmap“, dated August 2016, which mentioned on its page 12 that 75% of foreign domestic workers were paid in cash.

Switching to account-linked payment systems will affect female foreign workers as much as male foreign workers.

How difficult will it be for foreign workers to open a bank account? Our top-of-mind concerns centre around the documentation required (passport already mentioned above) and the minimum balance they must maintain when their salaries are so low.

A week ago, TWC2 wrote to DBS Bank and Maybank to ask what their policies were for foreign worker bank accounts. TWC2 thanks both banks for their prompt and clear replies.

DBS Bank, which includes POSBank, replied to say:

The bank requires 1) a Passport as well as 2) a Work Permit or MOM In Principal Approval letter. The requirement for both documents are for proof of citizenship, purpose of being in Singapore as well as for KYC (know your customer). This is in line with the requirements from MAS as well as International AML and Counter Terrorist Financing regulations.

As for the minimum balance,

For the POSB Payroll accounts opened in conjunction with MOM issuance of Work Permit, POSB lowered the requirement to SGD500 average daily balance. The fall below fee has also been lowered to $2. The bank has also waived the requirement to maintain the average daily balance for the 1st month of account opening so as to allow newly arrived foreign workers to open the accounts without the requirement to place an initial deposit.

Maybank, for their part, explained:

Currently for Work Permit holders, they can open a Maybank passbook savings account if their employer is processing their salary crediting through Maybank (no other types of savings account are offered to them).

The same documentation applies for all foreigners, namely their passport, work pass and proof of address in Singapore. Upon account opening, we will issue a debit card to the account holder.

As for the minimum balance,

The minimum initial deposit required to open a passbook savings account is waived but there is a monthly fee of S$5 imposed on the account if the average daily balance of the account falls below S$1,000.

The above replies confirm what we have long suspected. While the exact details may vary from bank to bank, in general, no Work Permit holder can open an account without the cooperation of the employer.

Yet, the Ministry of Manpower does not require employers to pay salaries through the bank, and thus employers feel no need to help workers open bank accounts, if their company practice is to pay salaries in cash.

It gets worse. What if the foreign individual has an ongoing case with an employer (or former employer) and is no longer on a Work Permit? This person is required by MOM to stay on in Singapore till the case is concluded. He or she will surely need to commute. How is this person to

• open a bank account?
• maintain a minimum balance when he or she has no income stream?

With LTA already switching over to cashless payment at a few stations, the matter has an unexpected urgency. TWC2 will be developing some proposals to ensure that foreign workers are not left marginalised by our public transport policies.

19 men out of 356 in our survey gave us “other” as an answer. We asked them to explain. The majority (14 of them) said they were paid with a cash cheque. They had to go to a bank counter to encash them. One said he had a bank account but was still paid with a cheque. The rest said that it was a mix of cash payment and bank payment for their salaries. In some cases, the employer used to pay in cash, then switched to bank; in other cases, vice versa.