Debit Card Cash Withdrawals Worry Bank Of Thailand

[webfact]

BOT WORRY

Debit card cash withdrawals worry BOT

Sarun Kijvasin

The Nation

BANGKOK: -- A sharp increase in debit-card spending in the third quarter has the Bank of Thailand concerned, as most people used the cards for cash withdrawals, not for merchandise purchases.

Debit-card spending stood at Bt2.35 trillion in the third quarter of this year, up 18.61 per cent from the same period in 2011, mainly through cash advances rather than merchandise purchases, according to the BOT's data.

In its study, the central bank expressed concern that most debit-card holders still do not understand the nature of the cards. It is studying whether tax incentives would encourage people to finance their purchases with debit cards directly, rather than using the cards to withdraw cash.

In the corresponding period, spending via automated-teller-machine cards went down by 14.98 per cent to Bt500 billion. Spending through credit cards rose only 11.15 per cent to Bt329 billion.

Among the three types of cards, debit-card spending accounted for 73.92 per cent of total non-cash transaction value. However, most debit-card transactions remained in the form of cash advances at ATMs.

"Using debit cards is quite similar to using ATM cards. About 80 per cent of total ATM-card transaction value was cash advances, while about 73.49 per cent of total debit-card transaction value was cash advances," the BOT report noted.

The similar values suggest a misunderstanding of the purposes of the two cards among consumers, and consumer preference of these cards to cash or credit cards.

It was found that most consumers preferred using credit cards when purchasing goods and services over debit cards.

Spending for goods and service purchases at point of sale amounted to 87.72 per cent of total credit-card transactions, and 79.11 per cent of total credit-card transaction value.

Spending for goods purchase at point of sale accounted for 2.15 per cent of total debit-card transactions and 1.01 per cent of total debit-card transaction value.

Although debit-card spending for goods and service purchase remained relatively low, good signs continued to be seen. In the third quarter, debit-card spending for goods purchases climbed 20.9 per cent year on year while credit-card expenditure for such purposes inched up 9.1 per cent.

The 2011 debit-card spending for goods and service purchases surged 167.06 per cent from 2010 because of various promotions and services.

Because of greater usage of debit cards than ATM cards, the BOT plans to provide knowledge and promote understanding of debit cards for non-cash transactions.

-- The Nation 2012-12-26

[steve down under]

Whats not to understand ?? by its very name a Debit card means the amount withdrawn is debited from the money in the cardholders account , but from what i have read about the way things are done in thailand it wouldnt surprise me if I am wrong !

[OzMick]

As most vendors who accept cards, and many more won't, demand a surcharge for their use or offer a similar size discount for cash, I expect this trend will continue. The only real advantage of a debit card is the minimisation of loss by theft.

[TommyDee]

as long as some unscrupulous retailers charge 2-4 percent for using a card..even a debit card.. this is the way of the future. surely its not down to consumer education but retailer training

[SlideRiceFC]

I'm a bit confused about the article referring to debit card withdrawals as "cash advances" which I consider and altogether different thing.

It's hardly a wonder that Thais prefer credit cards to debit as every day they are bombarded with credit card promotions from retailers encouraging their use. As for debit card use, I've been in fairly large stores that said cash only or would only take it if the purchase was at least 250 baht. This is no doubt due to the fees imposed on the retailer. And of course the average Thai buying food, clothing and other items from small vendors and street stalls is going to need cash on hand. Since most banks only allow a few free debit card ATM withdrawals before tacking on a fee it would make sense they would withdraw larger amounts each time.

Another thing that baffles me here is that the debit cards are standard issue...no name or real security features. All you get is a PIN number as you would with an ATM card. The only time the pin is used is at the ATM. Every time I plunk my debit card down to buy something and then sign the receipt all I can think about is that I know that I just used my own card and signed my own name but they don't. I could have walked in with someone else's card or them mine and no one would be the wiser. Back home all debit transactions required the use of your pin.

[OzMick]

as long as some unscrupulous retailers charge 2-4 percent for using a card..even a debit card.. this is the way of the future. surely its not down to consumer education but retailer training

Or perhaps lower bank fees for a simple transfer of balance from one account to another.

[yasorab]

If the Thai banking system and Government are worried about this, they should ask the question, Why will most retailers and particularly small businesses NOT accept plastic transactions. Answer CASH IS KING here. no trace no tax to pay, simple !!

[noitom]

The debit card offers the customer little or no benefit as it represents the cash in their account. No cash , no withdrawal. The only conceivable benefit is not having to carry cash at the risk of loss of cash. However, the bank benefits substantially as it gets to manage the float at least in overnight interest money. Just think about all that cash in the float and the bank investing that cash for a few basis points.

[chainarong]

So whats it got to do with the B.O.T., if you are using a debit card that's your money and you may spend it how you like, now if it was CCard that's different, that would indicate people are not getting enough in their pay packets.As for the amount charged to use the card, thats easy , do what they have done in Oz, legislate on all cards , that kicked their greedy <deleted> in., particularly the banks.

[kennedy]

Two years ago I went into Suzuki to by a motorbike.Was going to pay for it with my debit card until they told me it would be a $50 usd charge to use it. It was worth the trip to the bank to withdraw the cash. I wonder if they charge the same if you pay by check / cheque? Worthless, only good for ATM machines.

[seajae]

its stupid, it is your money but they want you to not use it. Just another grab for cash by the banks, they want to charge you to use your own money because it drops their bottom line if you dont use credit. They even make you pay to deposit money into someone elses account with the same bank, go figure, they seem to be able to charge whatever they like and if they arent turning enough profit they can just charge for something else. The debit card was brought in so that people didnt have to carry around wads of cash, trouble is that in Thailand most shops want you to pay in cash so you have no choice but to withdraw from your OWN money, if it was their money they would be very happy because then you have to pay interest.

[mic6ard]

Why is this a problem??? people taking out cash to spend VS using debit card, is pretty much the same thing ain't it? They are still using money.

[Familyonthemove]

I guess the concern is that some vendors may be avoiding tax by doing cash transactions? When I bought my bike I had to do multiple trips to ATM's to get enough cash to avoid a 3% surcharge if I used my K-Bank debit card. The problem is the vendors, not the debit card using buyers.

[terryp]

this is all going to end in tears..Thais have no understanding of the word consequences, the banks want Thais in debit thats why they keep pushing credit cards

Edited December 26, 2012 by terryp

[Halion]

This article appears to me to be nonsense. Whether a debit or a cash withdrawl transaction it is money held and belonging to the holder. The only thing that I can see is that the Banks want their revenue stream from cash withdrawl which is too me at least a form of extorsion.

[noob7]

As long the 'cash' is in a bank account, the bank needs only to move numbers from one account to another.The ATM's cash delivery is an expensive business for the Bank

The only winner of debit card usage in payment is/are the bank/s.

And in case, someone spends 10 times electronic, instead of 1 time taking cash from an ATM, there is money coming in for fees, too.

[ballpoint]

All the banks need to do is introduce a 150 Baht charge for every ATM debit card withdrawal. That'll make people think twice about trying to get hold of their own money. Of course, there'd be massive complaints about so unfair a practice.

[Phronesis]

The Bank has misread their data and the resulting analysis and discussion is piffle.

The high cash withdrawal rate is due to money laundering.

[bigbamboo]

Now then everyone, the banks are going to give you a heads up in how to manage your finances....

[Songhua]

No lucrative merchants fees being collected by the banks from businesses when cardholders use ATMs instead.

[Misterwhisper]

Am I understanding something wrong here or did the article writer mess it up? The latter would be ironic, because the writer even mentions in the article that most people do not udnerstand the nature of a debit card or the difference between a debit card and a credit card.

In my opinion, a debit card is directly linked with one's bank account. One can only draw cash at an ATM if there are sufficient funds in that account. Likewise for goods purchases.

On the other hand, a credit card - as the name implies - grants the holder a certain credit line/limit. If that limit is not yet reached, it is possible to use the card at an ATM for a cash advance. The latter will show up in the monthly statement.

Long story short: One CANNOT withdraw cash at an ATM with a debit card if there is 0 Baht in the associated account.

[daiwill60]

I'm a bit confused about the article referring to debit card withdrawals as "cash advances" which I consider and altogether different thing.

It's hardly a wonder that Thais prefer credit cards to debit as every day they are bombarded with credit card promotions from retailers encouraging their use. As for debit card use, I've been in fairly large stores that said cash only or would only take it if the purchase was at least 250 baht. This is no doubt due to the fees imposed on the retailer. And of course the average Thai buying food, clothing and other items from small vendors and street stalls is going to need cash on hand. Since most banks only allow a few free debit card ATM withdrawals before tacking on a fee it would make sense they would withdraw larger amounts each time.

Another thing that baffles me here is that the debit cards are standard issue...no name or real security features. All you get is a PIN number as you would with an ATM card. The only time the pin is used is at the ATM. Every time I plunk my debit card down to buy something and then sign the receipt all I can think about is that I know that I just used my own card and signed my own name but they don't. I could have walked in with someone else's card or them mine and no one would be the wiser. Back home all debit transactions required the use of your pin.

Yes, must agree wholeheartedly with all said here, It was a real shock for me when i realised anyone could walk into any Big C / Lotus etc and buy themselves anything they want, up to the limit of my Atm/debit card, as non of the bank tellers even bothered to compare the signatures on the till slip and the back of the card.

I was always under the impression, when living in the UK, that the global financial markets of credit ./ debit card companies, Visa , Mastercard, American Express etc , where all united in fighting Credit Card/electronic around the world. But even when in the UK, running my own shop, I was also as equally shocked when USA , or some other EU nationals, would only be required to provide a signature and not a PIN.

Apparently this type of fraud is costing billions all over the world we are constantly being told in the UK. So, why is it so obviously not being dealt with, with as much zeal all over the world as is being implemented in the UK and presumably in one or two other countries as well (somewhere) or maybe not!!

[ezzra]

Not to worry, the man in Dubai will cover all the shortfalls and his puppet sister

will call for a moratorium on all of the "struggling poor Thai people" debts so

the party can continue on and on in this la la land.

[bobl]

Most of you aren't reading between the lines.

They say, that the spending via debit cards is mostly through cash withdrawals. 2.35Trillion worth.

Banks make roughly 2% off debit card purchases - that's their "transaction processing fee" to the vendor (small vendors cannot negotiate their fees down to 2%, many are paying 4% or more). 2% of 2.35Trillion is 47 BILLION baht.

So, they want to 'educate' people to use their debit cards in-store rather than withdrawing cash and paying with that, because they're 'losing' at least 47 Billion baht in pure profit.

Nothing to see here other than the bankers' increasingly frantic cash grabbing. Banking, biggest legalised fraud ever.

As for the posters moaning about 'unscrupulous' vendors passing this extortion of their profits on to customers that use cards - wake up.

[noob7]

Apparently this type of fraud is costing billions all over the world we are constantly being told in the UK. So, why is it so obviously not being dealt with, with as much zeal all over the world as is being implemented in the UK and presumably in one or two other countries as well (somewhere) or maybe not!!

Because it doesn't cost the bank that much money.

The bank earns more money with the interest on the gambling, because they do not need to hold that much cash available.

[humblefalang]

if the Bank Of Thailand is this thick

that article was written by a second hand bar girl,

they have no idea of what is going on

Theft, money laudering,crime no tax rip off and more is what is going on,

sad but true(great song by the way)

THAILAND

Xxxxxxx joke

Yet i live here

Edited December 26, 2012 by metisdead

[QED]

Snip/

Another thing that baffles me here is that the debit cards are standard issue...no name or real security features. All you get is a PIN number as you would with an ATM card. The only time the pin is used is at the ATM. Every time I plunk my debit card down to buy something and then sign the receipt all I can think about is that I know that I just used my own card and signed my own name but they don't. I could have walked in with someone else's card or them mine and no one would be the wiser. Back home all debit transactions required the use of your pin.

What you are referring to is what they are calling ATM cards in the article. These are stock cards without your name on them. You can use them as debit cards in some retailers inside Thailand, but not overseas and not on the internet, their main purpose is as ATM cards (hence the reason 80% was in cash withdrawals, the rest purchases). Thai banks also offer real debit cards, mine is Visa with my name on it, and it is accepted worldwide.

[TheGhostWithin]

If the Thai banking system and Government are worried about this, they should ask the question, Why will most retailers and particularly small businesses NOT accept plastic transactions. Answer CASH IS KING here. no trace no tax to pay, simple !!

If you were a bar girl making 50-100K per month undeclared because of the nature of your work, I am sure you would not want the tax department knowing how much you earnt either. Like it or lump it, a large amount of revenue comes from three sources in Thailand: Exports of food/produce, exports of technology and the profits of (mostly sex) tourism. The first and second groups would comply with the law, however for the most part the third would not, as their activities are largely considered illegal as we know. The only way I can see tax revenue rising from this group is the legalization of prostitution, which has a lot of resistance within the Kingdom. My opinion of this is muted, I do enjoy the occasional drink with friends though it is normally always with my partner, my best friend of 6 years works in one of the more interesting places to dance in Bangkok.

Another reason that could be causing the concern, would be the fact that without Thailand's cash reserves, the country has nothing to fall back on if growth slows, which it will as ASEAN kicks in, with there being both more efficient (and advanced) neighbors, and also neighbors who will work for much less. Thailand has yet to define the competitive advantage in which it holds over its competitors.. I mean.. neighbors.

[caykay]

Cash transactions allow everyone to skirt paying taxes. Besides, why does the Bank of Thailand care about this? People are spending money like crazy, which is actually good for the economy here

[bdenner]

So the BOT can't tell the difference between a debit card and a credit card. Spare me days!