In his National Day Rally speech on 20 August 2017, Prime Minister Lee Hsien Loong spoke about the need for greater efforts in migrating to cashless transactions. Subsequently, other ministers developed the point further.

Transient Workers Count Too felt that it was important to ensure that whatever plans are drawn up, they should not inadvertently exclude foreign workers. We submitted a commentary article to the Straits Times. Unfortunately, the newspaper decided against publishing it.

The article is here for the record:

A few days ago, Senior Minister of State Janil Puthucheary, said that in trying to become a cashless society, we should not “make the assumption that people cannot get involved.” He was speaking with reference to lower-income groups.

Transient Workers Count Too’s experience with foreign work permit holders – possibly the largest low-income group in Singapore – leads us to believe that his perspective is correct. We have seen how workers have adapted to mobile technologies to communicate and socialise. They will certainly be able to adjust to cashless payments; it is not a question of educational attainment or adaptability.

However, a large percentage of them will face structural barriers not of their own making – barriers that must be dismantled when strategising a way forward to a cashless society.

The first barrier is rooted in the fact that cashless payment is inherently account-linked payment. However, in our August 2017 survey[i] of 356 male foreign workers, mostly from the construction sector, we found that 55% of them were paid their salaries in cash and did not have bank accounts.

An August 2016 report[ii] by management consultants KPMG mentioned that 75% of domestic workers were similarly paid in cash.

Enquiries with two major banks in Singapore revealed that to open an account, workers need to present a passport – but it is unfortunately common practice for employers to retain foreign workers’ passports. Thus, foreign workers will need employers’ cooperation to open bank accounts – cooperation that cannot be taken for granted.

One of the two banks we enquired with would also require the employer to process salary payments through it before it would open accounts for its employees. Employers may find this condition unacceptable.

The second barrier is the size of the minimum balance foreign workers must keep in their bank accounts. It is quite often $500 or $1,000, higher than many workers’ monthly basic salary. Meeting this requirement will be hard for them when they are newly arrived and have no savings. Domestic workers typically just get $20 a month in their first six to nine months because much of their salary is diverted to paying off recruitment costs.

Even when their earnings have stabilised, every dollar they earn is sorely needed to support the family back home. Holding money unused in a bank account may mean children’s school fees or mother’s medical treatment forgone.

The solutions are obvious. Every foreign worker should have a bank account. A work permit, being the equivalent of a citizen’s NRIC, should be sufficient proof of identity to open one. It would be better if a bank account is automatically opened for him or her at the same time as the issuance of a work permit, without involving the employer.

The question of which bank would naturally arise. We may have to acknowledge the fact that orthodox commercial banks have little interest in serving low-income clients. We can take leaf out of India’s book and set up a payments bank whose charter would be to provide basic banking services to all, especially the low-income. Just like India’s payments banks, the minimum balance can be set very low.

We must also ensure that transaction charges are kept low. For electronic transfers between accounts within the same bank, it should be zero.

In the near term at least, when cash remains a major medium of exchange, there must be an easy way for workers to withdraw cash from their accounts. Either the payments bank should open on Sundays to serve them or there should be inter-operability with other banks’ ATMs, or both.

Once all foreign workers have bank accounts, it would also make sense to require their salaries to be electronically transferred into their accounts. It would be ridiculous to continue paying workers in cash, when they would then have to get time off to bank in the cash. It would also nullify the seamless efficiency gains we hope to enjoy from going cashless.

Qatar, Saudi Arabia and the UAE have already implemented laws mandating the payment of foreign worker salaries into bank accounts. They made the move for different reasons – to tackle salary non-payment and similar abuses – but the point is that other countries have done it.

As Singapore works out an action plan towards a cashless society, we should ensure that it is inclusive from the start. An introduction that treated foreign workers as an afterthought may end up causing a lot more complications as we try to bring them within scope later. The efficiency benefits we hope to enjoy from going cashless will come more slowly if they are not able to participate in e-payments from the start.

We do not have to dumb it down for foreign workers. What we have to do is to dismantle the structural barriers that have been put up.

[i] http://twc2.sg/2017/08/25/going-cashless-over-half-of-work-permit-holders-dont-have-bank-accounts/

[ii] https://home.kpmg.com/sg/en/home/insights/2016/09/singapore-payments-roadmap-enabling-the-future-of-payments.html