Analyzing The Impact Of Cashless Banking On Profitability And Customer Satisfaction In Singapore

Background of the study

The creation of new and advanced technologies in the existing era has improved the financial sector activities of the international economies. The deployment of such technologies as well as electronic gadgets has been beneficial in sound service qualities of the financial organisations (Dzombo, Kilika & Maingi, 2017). The operating banks in the Singapore economy are able to enhance their operating activities and service quality through electronic tools in the banking system. As a result, cashless banking has emerged and cashless activities are enforced with the use of ATM and online banking system (Kamboh & Leghari, 2016). The cashless banking process minimises the geographical boundaries and time required in the manual banking system. The developments observed in the banking activities through cashless banking and the degree of profit that the banks recognise for such kinds of activities would be understood.

The main reason behind undertaking this research is the initiation of cashless banking, which has resulted in the development of new and enhanced activities and in this manner; it would be beneficial for fulfilling customer satisfaction. The improvements inherent in the banking services through cashless banking would be analysed and thus, the profit to be achieved could be ascertained (Alao & Sorinola, 2015). The formation of the banking activities and time saving feature through cashless banking would be assessed due to which this study has been undertaken.

For this research, the researcher has developed an understanding of the modifications that have occurred with the initiation of cashless banking activities, the degree to which there has been customer satisfaction and the degree of profitability achieved by the banks. One of the primary issues is that the degree of profit obtained by the banks through cashless banking is unknown and thus, analysis of the same is vital to gain an overview of the suitability of cashless banking (Ugwueze & Nwezeaku, 2016). The analysis of various models and variables would be beneficial in ascertaining the aspects leading to the formation of customer satisfaction through cashless operations and thus, the research paper could be finished effectively.

Aim:

The aim of this research is to analyse the ways through which cashless banking assists in providing competitive advantage to the banks; thereby, increasing their profit level and customer satisfaction.

Objectives:

The research is formulated with the objective of analysing and gaining knowledge of the ways through which cashless banking supports in increasing profitability level for the banks operating in Singapore.

• How cashless banking has been helpful in the development of the profitability of the banks in Singapore? 
• How cashless banking assist in the development competitive edge for the banks in the banking sector? 
• How does cashless banking contribute to the creation of customer satisfaction?

The initiation of cashless banking in the context of Singapore has not received much attention from the academic practitioners. Such banking originates from the hierarchy of a bank choosing to overhaul the bank strategy and looking to modify the organisational dynamics. This has direct impact on the staffs and the customers engaged in the banking sector of Singapore. This chapter is prepared for exploring the reactions of the customers towards cashless banking implemented by the banks of Singapore. Due to this, the literature review is divided into two parts. The initial part focuses on the literature confronting the bank, which include organisational change and customer relationship management. The latter part of the section concentrates on the literature confronting the customers, which include reaction to change and demands by the customers.  

Rationale of the study

By initiating cashless banking, the Singapore banks have undergone radical organisational change. The banks now focus on providing effective customer services to its customers. Therefore, the following bank theories are considered for this particular research:

Before the enforcement of cashless banking, the Singapore banks have undergone significant organisational change for staying competitive in the sector. The technological enhancements in areas like broadband and internet pushed the change in the banking sector (Ng, 2018). The Singapore banking sector has witnessed significant change, as no cash options are available in some banks and other banks are still providing certain cashless services. The technological advancements like enhanced broadband infrastructures are deemed to be the primary reason due to which cashless banking has been introduced. By using these technological advancements, it becomes possible for the customers in accessing their locations at any place and time. The initiation of schemes like internet banking services, banking applications for smart phones and telephone banking has eliminated the need for the banks in offering cash services (Taasim & Yusoff, 2018). Moreover, the technological advancements lead to cost minimisation because of transaction handling charges along with enhancing the availability of electronic transfers. By using the same as base from such improvements, plastic cards have evolved in the form of debit and credit cards increasing the process of cashless banking in banks.

In the current era, it has become necessary for any business organisation to find out the wants of the customers, meet their requirements along with their desires. By satisfying the customers, it is possible to establish values for the customers along with staying profitable and maintaining the desired levels of performance (Howgego, 2018). This implies that the organisations need to possess a strong orientation towards the customers and therefore, they need to exercise sound CRM for self-prosperity. Customer relationship management is significant in the banking industry of Singapore, as it is the only process associated with the bank between staffs and customers and the Qualified Financial Advisors.

In order to undertake the transition successfully for completing cashless banking, it needs to have exquisite alternatives available to the customers, which would result in effective customer relationship management. One possible path is to develop a wholly integrated e-banking system by taking into account all the needs of the customers. Information technology could have favourable or unfavourable impact on the level of satisfaction of the customers. In case, the banks are cashless and the consumers still want to use cash, they need to be able to draw money from ATMs (Toh, 2018). If there is a glitch in information technology and all ATMs are compelled to shut down, the customers would experience cash shortage and they might become highly infuriated. For alleviation of the potential downfalls in the levels of satisfaction, the bank services need to be used in a value-added manner, as ascertained by the customers. The banks are required to estimate the expectations of the customers to the banks becoming cashless along with providing essential customer services. If the banks of Singapore follow this, they are deemed to be representing effective levels of customer relationship management.

Problem statement

For effective communication of change to the customers of the bank, the management needs to be aware of the various channels of communication, which are suitable to the varying diverse base (Ledford & Gast, 2018). The customers using certain methods need to continue receiving information this way; therefore, the bank is efficient in using its resources. The younger customers of a bank are inclined in using internet and they need to be aware of the various systems in place on the part of the bank compared to the older customers of a bank. By using this information, the banks could use websites related to internet banking for communicating the change to the customers, since they are probable to interact with the same (Olaoye & Adebayo, 2017). In case, the customer segment is not involved in regular usage of the web banking, there would be efficiency in e-mail, as they are viewed as the technological generation.

The initiation of cashless banking has considerable impact on the customers and it is necessary for reviewing the literature confronting the reactions of the customers along with conducting a detailed research of the change effect. Therefore, this section could be categorised into the following sub-categories:

The reaction to change of the customers is crucial for successful implementation of the stated change. The behaviour of the customers as well as their attitude towards the new change needs to be addressed for accomplishing a successful outcome. According to Nair (2016), the reaction model of the generic change is inherent. In this model, three faces are inherent, which include resistant, supportive and neutral. Resistance is created owing to change; and therefore, the backlash could not be avoided. By introducing cashless banking, there might be a feeling among the customers that the new organisational structure would influence them negatively (Jumoke, Olugbenga & Mudasin, 2015). As a result, the customers become resistant to change. The customers who do not conduct cash transactions with their banks would not be influenced by the change by remaining neutral. The customers wishing to avail additional customer relationship management and advice would be boosted by the transition and thus, they would tend to support cashless banking.

It is noteworthy to mention that that all resistance to change is not damaging owing to issues that might arise, which are not expected by the banks. These issues could be addresses by the bank and this would result in stronger organisational structure. According to the research work of Ewa and Ina (2016), there are certain advantages of resistance to change from the customers and the ways through which it could enhance the strategy of an organisation in the long-run.

As per the liquidity preference theory of John Keynes, it becomes possible to describe the demand the customers have in order to possess cash. This encompasses three various motives, which include transaction motives, speculative motives and precautionary motives. The transaction motive includes the areas, in which the customers have cash for conducting daily transactions, while the precautionary motive includes the areas, in which the customers hold cash to combat with emergency situations. The speculative reasons to hold cash are for investments and the intention is to obtain additional cash by accepting risk (Bátiz-Lazo & Smith, 2016). Owing to the increasing availability of ATMs and technological progress, the use of debit cards as well as electronic payments is made. For smaller transactions, the customers use cash, while for undertaking expensive purchases, debit cards are used.

Research aim and objectives

It has been found that the cost of the transactions to the customers has been a significant factor for purchase decisions. Moreover, the electronic payments are found to be inexpensive compared to cash payments; therefore, the customers conduct more transactions by using debit cards (Sowmya, 2018). Even though there is global acceptance of cash, it is seen as unsafe in contrast to debit cards. However, it has been argued by Muhibudeen and Haladu (2018) that cash payments are safer than electronic payments, as it is easy to recover stolen money physically, instead of retrieving the financial information of a customer by using electronic medium.

There are certain methods to inform the customers regarding change likely to occur in the banking branches. For instance, the banks could use posters for notifying the customers along with making them aware of the probable change. Mass media is another tool that the banks could use for communicating the change (Paramashivaiah, 2017). Newspaper spreads, online advertising and television and radio adverts could be used for communicating change to the public.

The chapter clarifies the reason behind undertaking research methodology and it explains the primary characteristics of the research design. The literature review section has shed light on certain areas, which have not been considered previously to the forefront. Therefore, this research has focused on the ways through which the customers react to change as well as the lessons learned.  This is because it has assisted in determining the impact of cashless banking on the performance of the banks operating in Singapore.

For this particular research, the researcher has chosen the survey research. This is because the research is aimed at evaluating the performance of the Singapore banks after the introduction of cashless banking in the nation. The researcher has used the customers of the different banks operating in Singapore and the recommendations of the research would be open to the other banks thinking of introducing cashless banking.

According to Mackey and Gass (2015), numerous debates have occurred in relation to choosing an adequate sample size for an examination. It is significant that a fair representation of the target is used. The sample size that the researcher has selected is essential, since it would ascertain the validity and accuracy of the research (Taylor, Bogdan & DeVault, 2015). Since the research is conducted in Singapore, the researcher has considered 30 customers from different listed banks in Singapore. For selecting the sample, the researcher has chosen probability sampling in the form of simple random sampling, as it provides all the participants with equal opportunities of being selected in the survey process (Lewis, 2015).

For conducting the data analysis, the researcher has used the MS Excel function to convert the responses of the bank customers into meaningful graphs, charts and tables. Initially, the opinions of the respondents have been gathered after the researcher has provided with a close-ended questionnaire, which is to be filled by the respondents within 7 days. The researcher has mailed the questionnaire to the 30 customers via e-mail and the responses obtained have been categorised by using different options. After gathering all responses, the data obtained have been converted into graphs, tables and charts with the help of Excel function.

Research questions

In this research, appropriate code of conduct is followed by the researcher. The researcher has collected data from authentic sources so that the research outcomes could be accurate and trustworthy (Flick, 2015). Moreover, the researcher has not asked any personal information from the customers of the banks for persuading them to participate in the survey process. Along with this, there would be no disclosure of the identity of the respondents in order to maintain their confidentiality. Finally, the research paper would not be used for business purpose and the researcher would not entertain, if the same is done.

This chapter represents the findings from the research, evaluates them and provides a generalised comment on all the research sub-sections. The research findings have been used for defining the impact of cashless banking on the bank performance through customer survey. This has assisted in providing answers to the research questions.

Q1. Tick your age group:

Age group	Frequency	Total respondents	Percentage of responses
18-25 years	19	30	63.33%
26-35 years	7	30	23.33%
35-44 years	2	30	6.67%
45-54 years	2	30	6.67%
Grand Total	30		100.00%

Table 1: Age group of the respondents

(Source: As created by author)

Figure 1: Age group of the respondents

(Source: As created by author)

According to the above figure, it is evident that most of the customers of the chosen banks fall between the age group of 18-25 years. This implies that maximum customers of the banks fall within this age group; however, only 36.67% of the total respondents fall above the stated age group, which is identified as a major concern for the researcher.  

Q2. Which bank category do you consider as technologically advanced?

Sector	Frequency	Total respondents	Percentage of responses
Private sector banks	17	30	56.67%
Public sector banks	13	30	43.33%
Grand Total	30		100.00%

Table 2: Technological advancements

(Source: As created by author)

Figure 2: Technological advancements

(Source: As created by author)

The above diagram clearly illustrates the fact that most of the respondents think the private sector banks to be technologically advanced compared to the public sector banks. This is because that the government of Singapore is yet to implement cashless banking in all its banks, while the private banks have adopted this system to provide maximum convenience to the customers. It has been analysed in the literature review section 2.2.1 that the Singapore banking sector has witnessed significant change with few banks becoming entirely cashless and others providing a number of cashless services. Thus, in terms of technology, the private sector banks are leading the sector.

Q3. Which factor promotes you the new banking techniques?

Promotion	Frequency	Total respondents	Percentage of responses
Cost effectiveness	8	30	26.67%
Ease of use	4	30	13.33%
Minimised transaction time	10	30	33.33%
Technology savvy	8	30	26.67%
Grand Total	30		100.00%

Table 3: Factors promoting new banking techniques

(Source: As created by author)

Figure 3: Factors promoting new banking techniques

(Source: As created by author)

As per the above figure, it is evident that 33.33% of the respondents think the main benefit by using cashless banking is minimised transaction time. This is because if the customers have to avail cash services, they need to visit their nearest branches for making cash transactions. However, with the help of cashless banking, it becomes possible for them to conduct monetary transactions at their convenient places. As evident from the literature review section 2.2.2, one possible path is to develop a wholly integrated e-banking system by taking into account all the needs of the customers. Thus, by using e-banking services provided by the banks of Singapore, the customers could make transactions at a rapid pace and this has assisted in increasing the profitability level of the banks.

Literature Review

Q4. Do you think cashless banking has been superior compared to cash services provided by the banks?

Superiority	Frequency	Total respondents	Percentage of responses
Strongly agree	16	30	53%
Agree	9	30	30%
Neutral	3	30	10%
Disagree	2	30	7%
Strongly disagree	0	30	0%
Grand total	30		100%

Table 4: Superiority of cashless banking over cash services

(Source: As created by author)

Figure 4: Superiority of cashless banking over cash services

(Source: As created by author)

It is apparent from the above figure that 53% of the respondents have strongly agreed to the fact that cashless banking provides additional and better features that could not be provided by cash services at the banks of Singapore. It has been identified from the literature review section 2.3.2 that owing to the increasing availability of ATMs and technological progress, the use of debit cards as well as electronic payments is made. For smaller transactions, the customers use cash, while for undertaking expensive purchases, debit cards are used. These are the primary reasons that the customers think cashless banking to be superior over cash services.

Q5. Do you find presence of adequate online platforms for availing cashless banking facilities?

Online platform	Frequency	Total respondents	Percentage of responses
Strongly agree	15	30	50%
Agree	11	30	37%
Neutral	4	30	13%
Disagree	0	30	0%
Strongly disagree	0	30	0%
Grand total	30		100%

Table 5: Presence of online platform

(Source: As created by author)

Figure 5: Presence of online platform

(Source: As created by author)

The above figure clearly illustrates the fact that majority of the respondents find adequate online platforms for availing cashless banking services. As evaluated in the literature review section 2.3.1, the reaction to change of the customers is crucial for successful implementation of the stated change. The behaviour of the customers as well as their attitude towards the new change needs to be addressed for accomplishing a successful outcome. In this case, most of the banks of Singapore have implemented the cashless banking system successfully through the use of advanced technologies and thus, the nation is deemed to be progressing technologically in the banking sector. As a result, the banks of Singapore have managed to maintain competitive advantage in the market.

Q6. How satisfied are you with the current cashless banking services provided by the banks?

Online platform	Frequency	Total respondents	Percentage of responses
Strongly satisfied	16	30	53%
Satisfied	9	30	30%
Neutral	4	30	13%
Dissatisfied	1	30	3%
Strongly dissatisfied	0	30	0%
Grand total	30		100%

Table 6: Satisfaction level of the customers

(Source: As created by author)

Figure 6: Satisfaction level of the customers

(Source: As created by author)

As apparent from the figure, maximum customers are observed to be extremely satisfied with the cashless banking services provided by the banks of Singapore. It has been assessed from the literature review section 2.2.2 that for alleviation of the potential downfalls in the levels of satisfaction, the bank services need to be used in a value-added manner, as ascertained by the customers. The banks are required to estimate the expectations of the customers to the banks becoming cashless along with providing essential customer services. The banks of Singapore are found to be following this pattern successfully and thus, they have achieved success in providing maximum satisfaction to the customers through the cashless banking system.

Conclusion and Recommendations

Linking with objective 1: To identify the role of cashless banking in developing bank profitability in Singapore

The survey questions 2 and 3 help in fulfilling this particular research objective. It has been evaluated that the private sector banks in Singapore are more prone towards implementing the cashless banking system than the public sector banks. However, the initiation of this system has increased online transactions and the customers find it convenient to purchase stuffs from their nearest locations. In addition, it has been analysed that the increasing number of ATMs and use of debit cards for expense purchases have helped the banks to increase their profitability level.

Linking with objective 2: To analyse the role of cashless banking in developing competitive edge for the banks of Singapore

The survey question 5 has partially fulfilled this objective. This is because due to the limited timeframe, the researcher has not been able to collect secondary data, which could have added more to meeting this objective fully. However, from the opinions of the surveyed customers, it has been gathered that many banks have successfully implemented cashless banking system; thus, making it easier for the customers to perform transactions without worrying about cash. This has definitely contributed in developing competitive advantage to a certain extent for the banks of Singapore. 

Linking with objective 3: To know the contribution of cashless banking to the creation of customer satisfaction

The survey question 6 has helped in fulfilling this objective. It has been evaluated that the banks are successful in estimating the needs and demands of the customers and accordingly, they have designed the cashless banking system. This has added values to the wants of the customers, which have helped in maximising their satisfaction level.

Recommendation 1: The banks of Singapore are needed to provide alternative areas for the customers so that they could deposit and withdraw cash. With the help of such alternative places, any negative impact of cashless banking on the customers would be minimised, as they would still be able to access the identical features in different places like before.

Recommendation 2: The government of Singapore needs to encourage its public sector banks to initiate the cashless banking system, in which it has not yet been initiated. The customers prefer using online platforms for making expensive purchases rather than cash and hence, focusing more on cashless banking would add further to their profitability and the economy of the nation.

There are certain limitations in this research, one of which is the limited number of respondents due to limited timeframe. Another limitation is the inability of the researcher to use secondary data, which could have contributed immensely to the research findings, especially the role of cashless banking in developing the economy of Singapore. Therefore, this research could be undertaken in future by undertaking increased number of respondents and consideration of secondary data.

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