Covid-19 keeps everyone at home – and away from ATMs and banks – due to social distancing measures and the fear of spreading the virus from common surfaces.
Online cash withdrawal services are increasingly turning to avoid large crowds.
"It's only a matter of time before ATMs and bank branches disappear – with or without SOCASH," said co-founder and CEO Hari Sivan of the online cash withdrawal service in an interview with Vulcan Post.
Pandemic or not, the online startup continues to strive to disrupt the cash flow industry.
Cash withdrawals made easy with an app
They were founded in 2015 by Hari and his wife Rekha and wanted to enable people to easily withdraw cash from a network of related businesses.
With SOCASH, users can simply download an app from the Apple App Store or Google Play Store and enter the amount of money they need.
Then you can enter the closest shop connected to SOCASH, scan a QR code and collect your money.
With every transaction, users receive points with which they can redeem rewards, similar to the loyalty program for apps like Grab.
During the Covid-19 pandemic, SOCASH's service came at a convenient time, but they were not immune to the effects of the crisis, which led to an economic recession.
The transaction volume decreased by 35 to 37 percent, Hari reported.
To cope with the pandemic, SOCASH "focused on reducing fixed costs, reduced marketing activities and working on expanding (their) product capacities to further diversify sources of income".
With this, the startup announced a new partnership with the supermarkets Sheng Siong and Prime earlier this month.
SOCASH will launch a new ATM in 62 branches to reduce the number of ATMs and banks and use contactless methods for the general well-being and security of everyone.
This is a significant departure from SOCASH's original business model, which relied on personal contact between merchants and app users to withdraw cash from the counter.
Added value for banks and businesses
Previously, in an interview with Vulcan Post in 2018, Hari announced that banks spent up to $ 80 million (S $ 111 million) on ATM maintenance in 2015 S $ 400 million unused cash. This is an enormous waste of resources.
Maintenance is expensive, and although it is difficult for banks to operate without them, we see some banks in Asia aggressively closing branches and removing ATMs.
– Hari Sivan, co-founder and CEO of SOCASH
"The network is collapsing and unable to meet the demand of the next billion who begin their consumer journey to Asia," he added.
By using SOCASH merchants instead of expensive ATMs, banks reduce costs and gain access to a network of stores that serve as virtual ATMs – a self-scaling last-mile network.
SOCASH replicates the revenue model for transaction fees for ATMs / branches. Banks are SOCASH's revenue-generating customers, and SOCASH generates revenue with every transaction made in the app, which is shared with the branches in its network.
Hari Sivan, co-founder of SOCASH / Image Credit: SOCASH
"Our business is primarily determined by the number of transactions, which in turn depends on the size of our network and the number of banks or financial institutions that work with us."
SOCASH is aimed at smartphone locals who are looking for “cash-on-demand with little value,” explains Hari. To date, SOCASH has recorded over 341,000 downloads for the app.
The drivers that affect user preferences are closeness, privacy, and financially prudent people who stay away from credit cards, are sensitive to annual fees, and have careful spending habits.
– Hari Sivan, co-founder and CEO of SOCASH
Habit is an obstacle to user acceptance
SOCASH is therefore eagerly awaited in banking and investment circles.
The app raised $ 5.5 million ($ 7.6 million) in a Series A financing round with Vertex Ventures in August 2018.
SOCASH is also the first recipient of the Monetary Authority of Singapore's grant to the financial sector for technology and innovation under the Proof of Concept program.
However, the startup is subject to the same teething problems that all new companies are facing.
Users continue to rely on ATMs to withdraw cash instead of switching to SOCASH.
Photo credit: CapitaLand
"The reasons range from awareness, closeness, habit and product preferences," says Hari. "There is a long lead time for each product that coexists with other payment options."
Popular blogs that review SOCASH have complained about the lack of trained retailers.
One of the main incentives for downloading SOCASH was the desire to benefit from the generous reward system that has since been updated.
"Good things don't last forever. They were and probably are still in the phase I call the" start phase ", muses The Bulging Wallet, a personal finance blog.
"As you mature, your incentives become less generous to consumers – that's understandable," he added.
SOCASH is also far from surpassing ATMs in terms of geographic convenience and density.
SOCASH currently has more than 1,500 withdrawal points across Singapore. For comparison: According to a parliamentary report from 2014, there are more than 2,050 external ATMs.
Statista also reported in a 2018 study that there are 66.45 ATMs per 100,000 people in Singapore.
Transform SOCASH into the new global ATM
So the solution is obvious: increase the number of payout points, change consumer habits and make every transaction count.
While Covid-19 may have delayed SOCASH's plans, Hari is keen to see app transit from one-country to multi-country operations.
SOCASH currently has more than 16,500 stores in Singapore, Indonesia and Malaysia. These include mom and pop shops, cafes, retail giants like 7-11 and supermarket chains like Sheng Siong.
According to Hari, the ideal market has a "large digital middle class population that is spread across a large geographic region, has low debt-based consumption, supportive regulators to provide broader access to banking, and (and) are the cost of cash significant problem for bank profitability. "
Fortunately, much of Southeast Asia and the Greater Asia Pacific region fit this profile.
Hari also explains that the density of withdrawal points per location will vary depending on the needs of each community.
Our goal is to keep the cash float to meet the daily average demand, which is between SGD 15,000 and SGD 25,000 per day for a typical medium-sized housing development in Singapore.
– Hari Sivan, co-founder and CEO of SOCASH
In addition to increasing the number of stores in the SOCASH network, the app will also increase usability and adapt to the Covid 19 pandemic.
In addition to installing ATMs at its merchants to reduce human interaction, SOCASH will also introduce acceptance of QR payments once regulatory approvals for the ASEAN payment framework have been granted.
The startup will then control a sales platform and use shops as virtual branches.
In order to increase the added value for banks, SOCASH will contribute to the customer acquisition funnel by “setting up the distribution of savings accounts, loans, credit cards, etc.”, says Hari.
SOCASH will no longer be dependent on reward programs, but will move into the next phase of life and rely on network partners who "advertised it in their community as local ambassadors".
Online cash withdrawal services will be the future
Hari maintains its original limitation that ATMs will be out of date in the coming years. But it looks like it will be a long time before cash is out of date.
An international study by the Bank for International Settlements (BIS) agrees that "unprecedented public concerns about the transmission of viruses via cash" have led to a decrease in cash consumption in some countries.
However, trends differ across cultures, and the same risks exist for card-based payments that require PIN and signatures. The BIS has also said that cash transactions may need to be strengthened.
BIS said: "If cash is not widely accepted as a form of payment, it could lead to a" payment difference "between people with access to digital payments and those without. This could have a particularly strong impact on non-bank consumers and older consumers. "
One thing is certain: contactless digital transactions that companies like SOCASH are working towards are becoming increasingly relevant.
SOCASH is currently concentrating on refining its product, offering added value to banks and expanding the network of SOCASH dealers, whether pandemic or not.
"Our vision is distributed banking," concludes Hari simply.
The goal? Conversion of every business and customer into a virtual cash distribution network from Asia.
Selected image source: SOCASH