CASHLESS PAYDAYS

Mr Lim Boon Heng (Kebun Baru): Mr Speaker, Sir, I know that most of us have had a long session and would like to see the end of the debate. But I have obtained the right to raise a matter on the Motion for the Adjournment and this relates to a proposed amendment to the Employment Act.

The Acting Minister for Labour made a major policy speech on 24th December 1983 during the annual dinner and dance of the Singapore Industrial and Services Employees' Union. The Minister announced that the Employment Act is to be amended to give employers the flexibility to pay their workers through their bank accounts. This would raise productivity by reducing staff needed to pay salaries and would also reduce security risks.

First, I would like to commend the Minister for informing the unions in advance of his Ministry's intentions. I wish also to commend him for discussing this matter further with union leaders during a dialogue session on 25th February 1984. This openness with the unions indicates that the Ministry believes in consulting with the workers' representatives on matters that will affect workers, that the Ministry is sensitive to the problems that workers may encounter, and that it is willing to help overcome these problems.

It is my intention to point out some of the problems and to put forward some proposals that will help us move forward into a "cashless society". Sir, with your indulgence, I would like to ask the Clerk to circulate two Annexes (Cols. 1469 - 1476) that would help make my remarks brief. Annexes - BANKING HOURS, LOCATION OF ATMs, PRELIMINARY FINDINGS OF NTUC's SURVEY ON CASHLESS PAYDAYS - 15 MARCH 1984 (Cols. 1469 - 1476)

[Copies of Annexes distributed to Members.]

Sir, not so long ago the possession of a bank account, even a savings account, was considered a privilege which only the middle income and upper income groups could enjoy. Today, the majority of Singaporeans have a bank account but this middle income or upper income tag is still attached to the use of bank services. The majority of workers in Singapore regard the bank account as a savings account where they can salt away the small sum of money that they can afford to set aside each month. To use the bank's services for other purposes, such as the payment of bills, is still regarded by the lower income group as essentially a "middle class" practice. And this is because the majority of them are paying cash for most of their transactions. 60% of the workforce (690,000) are earning less than $600 per month. So it is doubtful that they would have very much left at the end of the month.

To get the lower income worker to accept payment of his wages into his bank account, it is necessary to convince him either that he has graduated into the middle income group or that banking services are now extended to the working class and it is convenient for him to use it.

Next, is the question of convenience. In the Annex which I have circulated, the banking hours that are practised by our banks now are well within the working hours of workers. So if workers wish to withdraw cash from the bank, they are unlikely to get the approval of their employers for time-off during working hours, since this would negate the objective of increasing productivity. So they will have to join the already long queues at the banks during their short lunch breaks on payday. For many workers, such a trip to the bank is not feasible because of the distance.

The NTUC carried out a survey recently. Only four banks said that they are prepared to consider the question of extending banking hours beyond the normal office hours. The rest of the banks have no plans at all. So how are the workers to withdraw cash when the banks are closed? Does the answer lie in automated teller machines (ATMs)? I think that ATMs provide a partial answer but there are a number of problems.

ATMs are suitable for the educated, particularly those who are conversant in English. But we must remember that our workforce includes 108,000 workers who have never attended school and another 181,000 workers who have no qualifica- tions, ie, below PSLE. For these 289,000 workers, ATMs are of no use. Until ATMs can respond to voice instructions in four different languages and several dialects and can verify the account holder by scanning the thumb-print, these workers are unlikely to be able to use ATMs. But this does not mean that such workers cannot be paid through their bank accounts. They can, provided banks are able to provide personalized services. Banks have accepted thumb-prints in place of signatures on withdrawal slips. There is no reason why such a practice cannot continue.

Apart from those without education, there is a substantial number of workers who are educated in other language streams. Such workers will have difficulty operating ATMs which generally have instructions in English. Only two of POSB's ATMs are multi-lingual. Thus, from this category of workers, there will be a demand for personalized banking services during hours that are convenient to them. So will our banks be willing to extend banking hours beyond normal office hours? If they are prepared to do so, such workers will be in a position to accept payment of wages through their bank accounts.

Twelve years ago, I lived and worked in Denmark. There the banks provided a very convenient service. All the bank branches open one day in the week until 8.00 pm. This was done by all banks on the same day of the week. With such a service, everyone could make their bank transactions and withdraw cash that they would need for a week. There is no reason why banks in Singapore cannot get together and agree to extend banking hours on the same day each week. If they do so, workers will have much less difficulty in withdrawing cash and would be unlikely to resist the switch over to cashless paydays.

We must not underestimate the workers' anxiety or even fear of ATMs. Some ATMs are designed to "swallow" the ATM card if the user fails to key in correctly his personal code number. Such instances have occurred because of the user's unfamiliarity with the procedures, and when it happens, the user faces a frustrating experience of being without cash until the bank can verify that it was a genuine error and not tampering with the machine.

When ATMs are used, it is a self-service. The transaction is automatically registered in the computer. Naturally the bank will rely on the computer records of the client's account. If a computer error is made and cannot be traced, the bank will believe its computer records. So if an account holder finds that there is a cash withdrawal that he has not made, he is left with the impossible task of proving his case. Just how do you argue with the computer? While such instances are rare, there is nevertheless a genuine fear on the pan of the workers.

Related to the problem of computer error is the question of security. The personal identification number code is meant to protect the account holder against someone using his card if it should be lost. However, this secret code can be noted by someone behind in the queue. There are also trusting workers who give the code number to their colleagues and request them to withdraw cash on their behalf. And there are also others who write the code number on the ATM card because they are afraid that they cannot remember it. These examples erode the security that an account holder should have. And indeed some account holders have found sums of money missing from their accounts and are unable to trace who did it or how it was done.

These problems may be technical and can be resolved. But workers need to be reassured of the reliability of the system and told how they should protect themselves. Banks and employers should familiarize workers on the proper use of ATMs. It is their responsibility to remove this fear of ATMs.

There are 338 ATMs in operation. The POSB has the lion's share, with 142 units. The other banks have 196 units. Are these ATMs adequate to cope with the demand if the half a million workers presently being paid in cash are switched over to payment through the bank? It takes at least one minute for a person who is familiar with the ATM to complete his transaction. Sir, can you imagine how long the queues will be on payday? If there are 60 persons ahead of you in the queue, you will have to wait patiently for a full hour before you can get your money. Look at it in another way. If there are 1,500 workers in a factory and all of them require cash on payday, and all of them line up behind the one ATM at their factory from 8 o'clock in the morning, the last one in the queue will have to wait in line until 9 o'clock the following day to obtain his cash.

No one is going to wait an hour to obtain cash. If he cannot get cash at the factory, he will have to go elsewhere. A logical place would be near his home. But are there enough ATMs to serve everyone? Let us take a look at Ang Mo Kio. The POSB has seven ATMs there and five local banks have a total of six ATMs. Can these 13 ATMs really cope with the needs of a quarter million people? And obviously only those who have accounts with the six banks in Ang Mo Kio can make use of ATMs, and even then, many of them will be served by only one ATM unless he is paid through the POSB.

When ATMs were introduced, I believe the banks merely thought of it as providing a service to the customers who may occasionally require cash at odd hours. I doubt that they had conceived of ATMs as replacing the practice of paying workers in cash at the workplace. So unless there is a rapid increase in the number of ATMs and banking hours are extended, it is too early for all the employers in Singapore to switch over to payment of workers' salaries through their bank accounts.

Presently the ATM networks are operated by individual banks. A group of smaller banks are moving towards a common network. The advantages of a common network are obvious. It enables banks to share the high capital cost and allows workers to withdraw cash from any ATM. I expect our banks would be reluctant to use a common network because of their keen competition for business. I would urge them to think big. It is only when ATMs are readily accessible that the move to cashless paydays will really take off.

Hong Kong is already ahead of us. Their 25 banks share the Jetco Switch network, and ATMs are a common sight in the transit railway stations, shopping centres and housing estates. And in Europe an agreement has been reached on a common standard that will allow the members of Eurocheque to link their ATMs. The system would be ready by 1985 and will allow travellers and tourists to obtain cash from any ATMs of the participating bank throughout Europe. The breakthrough has been made possible by agreement on uniform technology reached by the banks concerned.

At this early stage of our ATM development, it would be prudent if our banks could adopt uniform technology, simplified and common operating procedures. When the procedure for operating ATMs is uniform, the multiplier effect on possession of ATM cards will be tremendous.

It was recently reported that five of our leading local banks are studying a common network for electronic funds transfer at point of sale (EFTPOS). This would allow card holders to eat and shop anywhere in Singapore without the use of cash. The card resembles an ATM card, and the operating procedures are similar. This will be a big step forward to a cashless society. But since the operation of the EFTPOS and ATM cards is similar, will it not be possible to integrate the two into one card? This will simplify procedures and obviate the need to carry more than one card. If our banks are prepared to move in this direction, then it makes sense for the worker to have his pay credited into his bank account.

The NTUC is in the process of surveying the attitudes of workers towards the use of ATMs. The objective is to gauge their views through a representative sample of 2,000 workers. This survey is not completed yet, but I have run a quick analysis of the first 500 returns. I must state that these 500 returns do not constitute a representative sample because we have not received any reply yet from the daily rated employees' unions. Probably they have difficulty with our questionnaire which is in English and Chinese. This small sample is therefore more representative of the better educated workers. The results are in Annexe II. 81% of the workers have bank accounts. Of those who have bank accounts, 81% have savings accounts. Of those who have bank accounts, 47% use ATMs. When broken down into wage groups, it is seen that the higher the worker's income, the more likely he is to have use of ATMs. The percentage ranges from 40% of those earning less than $600 per month to 49% for those earning between $600 and $1,250 and 60% for those earning more than $1,251 per month. We asked those who did not apply for the ATM card or who did not use it, the reasons for this decision. The results are again significant. 20% stated that it was inconvenient; 24% were afraid that the ATMs may make mistakes, and 32% stated that they did not know how to use it.

In our sample, 50% of the workers were paid in cash. In the manufacturing sector, however, 92% were paid in cash, in sharp contrast to the service sector where only 30% were paid in cash. We asked those who were paid in cash whether there would be any problems if their employers paid them through their bank accounts. Only 14% stated that there would be no problems. The rest stated that it would be inconvenient; there would be queueing up problems, or extra travelling expense to go to the bank. Quite clearly, before cashless pay days can be achieved, workers in the manufacturing sector will have to be convinced of the convenience. Since the Minister's announcement of the intention to amend the Employment Act to give employers the flexibility to pay workers through their bank accounts, many employers have expressed their intention to do so. Few have demonstrated concern with the problems that their workers may encounter. Most employers merely press the union leaders to agree, and expect the unionists to convince the workers.

While the switch to cashless paydays will be a step forward, employers would be well advised to first seek the consent of their workers and to determine and help overcome the difficulties that they may face. They must be willing to explain the advantages to the workers to offer incentives and to pass on the cost savings to them.

In conclusion, Sir, I would like to say that our workers are very practical people. When they see an advantage, they are prepared to take it. We asked our workers whether it will be easy for anyone to learn to operate ATMs; the answer from 67% was "Yes". They felt that it was easy to use ATMs. Again, the manufacturing was lower with 53%, while the service sector responded with 73%. We also asked the workers whether they think that ATM is a useful way to deposit or withdraw cash and we got 65% responding positively. We also asked the workers that if they have to withdraw money from the bank which would they prefer, to use the ATM or to queue up at the counter? 62% preferred to use ATMs. Sir, I think the move towards a cashless society is a positive one but, in the process of implementation, I hope that the Ministry would make sure that our employers take the necessary steps to make sure that their workers would not face any difficulties.

The Acting Minister for Labour (Prof. S. Jayakumar): Mr Speaker, Sir, the proposal to amend the Employment Act to provide flexibility for employers to pay through cheques in the bank accounts is not a new one. It is not a sudden proposal. It goes as far back as 1981 when we have been in consultation with the unions and the employers. So this is something which has been in gestation and we have consulted the NTUC and the employers. The discussion is in the context of amendments to the Employment Act.

Mr Speaker, Sir, there is a provision in the Employment Act which requires employers to pay salaries to workers in cash. The explanation, historically, got nothing to do with cheques or bank accounts. It is, in fact, a safeguard to ensure that employers do not pay their employees in kind through worthless goods and this is a provision in Singapore we have had from 1965. It can be traced back to England in the 18th Century when unscrupulous employers used to pay off with flour, sugar and so on. So there is no problem in Singapore concerning payment in kind. So whatever changes we make to the Employment Act, I wish to assure the Member that we will still retain a provision prohibiting payment in kind unless with the consent of the employee. The proposed amendment is really to pro- vide for flexibility, to enable the employer to pay through cheques or to pay into his bank account.

What are the reasons for this? We have found that 86% of about 9,900 firms employing about 541,000 employees pay in cash for various reasons. We will have to move to change this because it is both unproductive and risky, for several reasons. It requires a considerable amount of staff, time and effort, for counting of the money; putting it in packets, and each packet with different types of amounts and combinations of notes and coins. Moving away from the cash payment also would cut down staff needed for security and escort of money and employees. It reduces the risk of robberies and even bodily injury to staff. It reduces inconvenience for workers for queueing up on paydays to collect money in cash. Above all, payment through cheques and bank accounts would also encourage greater savings on the part of workers. So it is in this context that the Government is thinking of amending the Employment Act.

But I must add that, in addition to the amendment to the Employment Act, the Government has also instituted a Committee headed by the Head of the Civil Service to minimize cash transactions for manpower savings, to look into payments avoiding cash transaction and payment of wages in both public and private sectors. In other words, our long term objective, as part of the productivity movement and savings, in manpower, must be to ensure that each worker in Singapore does have a bank account, That is our ultimate objective.

The Member for Kebun Baru has raised several points. I do not think that he has disagreed with the principle. But I take his points to be related to the implementation. He has raised several questions as to the need to be cautious, not to rush into it until more facilities are available. I would like to assure him that indeed the Ministry is not rushing into this. We are having discussions with the POSB and other banks to ensure that the problems that he mentioned - inadequacy of ATMs, longer banking hours, availability of ATMs in different parts of Singapore - these are overcome before the amendment is implemented. We will implement the law when we are satisfied that these problems have been resolved.

On specific points, his perception that people consider the use of bank accounts for other services to be associated with the middle class syndrome, I am not sure whether I agree with that. I discovered from the POSB that more than half a million GIRO standing orders exist. Secondly, of the daily rated employees in the Civil Service, more than 58% have POSB accounts. The figures cited by the Member for Kebun Baru arising from an NTUC survey, are themselves very revealing. He has said that 81% have bank accounts. That is very encouraging. He has said that 67% of those surveyed said that they felt that it is very easy to operate an ATM; 65% responded positively to deposit of money through the bank accounts and ATMs. I understand from his last sentence that 62% preferred to use ATMs. All these are statistics which, in fact, support the argument for moving faster towards payment through banking accounts and cheques.

I do not understand his point that about 289,000 persons who are lesser educated would have a problem, because as far as I know the ATMs do not require signatures. What you need is numbers and codes. And although they may not be sufficiently well educated, it does not mean that they cannot be trained or cannot be taught to use the ATMs. I think they can, particularly when today we have the same people who can operate complicated stereo and hi-fi sets and videos, programming days in advance, which requires a lot of dexterity with numbers. I think he has underestimated the intelligence of our workforce. Just because of the level of education, it does not mean that they cannot benefit from wages being credited to their savings account. Singaporeans are agile, willing to adapt to changes that will benefit them, whether changes to the metric system, whether new bus interchanges and the big changes that they will have to adjust to when the MRT comes about. The earlier we prepare our population for these changes the better. But I take his point that we must not rush these changes and ensure that they are prepared.

His final point that there should be adequate publicity and education, I am in agreement with that. I wish to assure him that the Ministry will do everything possible to launch adequate information and publicity about this. In this regard, it is not just Government, all the employers, banks, unions, union leaders and Members of Parliament will have to join hands in bringing about this process of explaining, encouraging our population on the uses and advantages and to allay their fears.

Question put, and agreed to.

Resolved,

That Parliament do now adjourn.

Adjourned accordingly at Fourteen minutes to Seven o'clock pm to a date to be fixed.