With credit card companies like Visa and Mastercard charging merchants a transaction fee of about 3 per cent, and Nets charging a fee of about 1 per cent, it is not difficult to see why cashless payments have not taken off despite being present for the past few decades (Challenges SMEs face in going cashless; Sept 2).
The European Union has capped transaction fees at 0.3 per cent for credit cards and 0.2 per cent for debit cards. In China, the fees are not more than 0.45 per cent for credit card transactions and 0.35 per cent for debit card transactions.
A Singapore retailer with daily sales of $100,000 charged through credit cards would have to pay $3,000 to credit card companies for providing this convenience to customers.
A Chinese merchant with the equivalent amount of sales - 480,000 yuan - would pay only 2,160 yuan or about S$450 in transaction fees.
This is a big difference in cost. It has an impact on profit margin and has caused some Singapore merchants to no longer accept credit card payments.
The Monetary Authority of Singapore must look into this issue. Until it reins in the transaction fees that credit card companies are allowed to charge, businesses will be reluctant to go entirely cashless.
Gabriel Cheng Kian Tiong