I basically said that both sides had their own points, and elaborated a bit on that -- this was as reported in the article. But I also went on to point out that this is actually a more fundamental issue about how Singapore is run: what do we do when the free market meets a social goal?
NETS was created as part of the drive towards a cashless society. But NETS is made up of the 3 local banks, all private profit-maximising entities (even if DBS is a Temasek-linked company). So there is a tension between NETS' role as a profit-maximising entity, and its public service in driving society's adoption of cashless modes of payment.
In this case, obviously profit maximisation and the free market won. But is that necessarily the most desirable result? I'm not necessarily so sure, and this is something that I feel is quite endemic in Singapore.
When it comes to charges and fees, the economic/financial argument and justification is almost always framed in a very narrow context, of cost and a reasonable profit. But such arguments fail to take into account other relevant factors. From the perspective of the private profit-maximising entity, that is rightly so.
But that is not the only valid perspective to consider. If and when you change the frame of reference, the correct decisoin could suddenly look very different. My wish is that at some point, such other points of view will get more of a hearing than they already do.
Nets fee increase 'did not breach law'
Competition Commission says alternative payment methods are available
Tuesday • June 26, 2007
Lin Yanqin
In a statement yesterday, the commission said the hike "does not amount to an infringement of Section 47 of the Competition Act".
In particular, alternative payment methods such as credit, debit and EZ-Link cards, were available to consumers, the commission pointed out. It also clarified that regulating pricing decisions was not within the Act's purview.
Under Section 47, firms with dominant market power cannot abuse their power by acting in ways that are anti-competitive, such as using predatory pricing to prevent a new, more efficient competitor from competing on the merits of its goods and services.
Earlier this month, the Consumers' Association of Singapore (Case) had protested against Nets' "unjustified" decision to raise the transaction fee levied on merchants. Case felt Nets was abusing its dominant position".
The Nets platform, according to Case, was so widely used and accepted that merchants had little choice but to accept the new fee — which will be raised come July to between 1.5 and 1.8 per cent of each transaction, from 0.45 or 0.55 per cent.
Nets had said it was forced to raise fees to keep up with the competition posed by debit and credit facilities, and that its new fees were still lower than what those facilities charged.
Yesterday, Case president Yeo Guat Kwang said that he was "deeply disappointed" by the commission's decision.
He told Today he disagreed that debit and credit were alternatives to Nets as "there are also many who only have Nets as a cashless payment option".
Case said banks had the responsibility to support Nets and keep interchange fees low: "Unfettered and unrestrained transaction fees increases will only serve to render Nets uncompetitive and less popular among consumers … accelerating its demise. We will all be worse off should that happen."
Its immediate concern is that retailers may pass the higher fees on to consumers. The association has already received two complaints of this nature, ahead of the hike.
Nets said on its website that it welcomed the commission's decision. Lawyer and Nominated Member of Parliament Siew Kum Hong felt that both Case and Nets had their "fair points".
"Nets was part of the effort in the drive towards a cashless society, and to benefit the public, so there was a public service element at the beginning," he said. "So Case was right to say it's not really the same as debit and credit cards."
But as a business, Nets has to watch its bottomline. "In the first place, Nets' fees are still lower than the debit card and credit card charges," he said. "In that sense, they are not abusing their power. And as a private entity, it's unfair to expect them to act like a public service."
