Bye bye to NETS

Our banks have done it again. Sometimes I really wonder if our big MNCs are getting complacent. Anyway, according to the papers today, the NETs, owned by our 3 local banks, suddenly decided that they are charging too low, and now wish to change the commission structure for NETs such that its similar (slightly cheaper) to the credit/debit cards. This affects the retailers/merchants offering NETs transactions. And yes, of course it affects the consumers. Ok, let's analyze this.

NETs stands for Network of Electronic Transfers. Purpose of product from my point of view is to get people to go cashless, and yet the merchants are still able to price their wares cheaply. Target audience should be the people in the heartlands. The cost structure is actually quite low. Only 0.2 - 0.5% I think. Can't remember... However, our retailers usually absorb the charges.

Buying using NETs is beneficial to the banks because:

1. Can't see the money left. Just swipe. This results in people spending more.
   
2. People do not need to carry too much cash around, and yet still have the spending power in their hands. People spend more freely.
   
3. Cost structure is low so that the businesses will be able to price their wares such that these people are attracted to spend

Indirect benefits to the banks:

1. People are keeping more money in the bank, so there's more money in the bank to loan out.
2. Businesses expand due to more customers. Borrow more money from the banks.

Once NETs increase their cost structure, from the business point of view, there's no difference between NETs and other credit cards. Tourists use Visa/Mastercard. So why do they need to support NETs? Just drop the card, and save on the charges.

Other businesses might keep NETs, but end up increasing the prices. Since they have an excuse, how do we know if they are increasing just to cover costs of NETs, or is it to profiteer from the double whammy of GST increase and NETs?

Either case, consumers like us lose out. What will happen to Sim Lim Square? Can you imagine people carrying $2000 in their pockets to go Sim Lim Square to get a computer? Why don't I spend slightly more, and get credit card points? I don't need to pay immediately too.

Do the banks win? I doubt so too, from the NETs point of view. In fact, they are shooting themselves in the foot. NETs market share will definitely drop. They have to understand that the NETs users are the price-sensitive group of people. You increase price, what do they do? Drop the card of course. Use cash. What happens when you see the cold hard cash? That's where you start to think whenever you wish to make any purchases.

Money withdrawal might be more often, banks might have to top up their ATMs more often. Businesses might suffer, so what happens to their bank loans? How about the effect on Singapore domestic demand?

Of course people might say I'm thinking more negatively, but come on... What benefits do you see? I don't see any, even for the banks themselves.

That is unless they are trying to phase out NETs, and can't think of anyway of doing it. So they use this as an excuse to make it die a natural death.

Oh well... Sayonara NETs... May you R.I.P.