the death of credit card

We have often heard people saying "i lost my job and thus the only way to survive better is to use credit card for paying petrol money.." - a common phrase.

The Malaysian community will suffer a huge social shock and setback by November 2005 when petrol station stop accepting credit card as payment method from its customers.



Reason:
Petrol station earn only 3% from Diesel and 5% from petrol of commission per transaction. Merchant fees for credit card service imposed by bank is between 1.25% to 3%, thus their net margin is between 1.75% to 3.65%.

Bad Economy:
This will be bad for the economy due to the fact that it affects the consumer directly. Petrol cost is one of the heaviest commitment a general Malaysian would ever have to bear. On the average, most people would be required to spend 10% of their income on petrol. The fact that petrol is more crucial than food in term of business one can afford to skip meal in a busy day, but skipping petrol is not possible due to official undertaking. Mind you that one can't cancel a business appointment just because the traveling distance is way beyond budgeted account, but one would probably skip meal on a business schedule.

Thus, credit card is the cushion for many to deal with financial management. Many would use credit card as the backup when the money in their banks have dried out while waiting for the pay day of the month. Sadly, they needed to pump petrol to get to work in order to get pay. While water is provided in the office and one can do away with expensive food, there is no way one can starve the vehicle.

In other words, by November 2005, many Malaysian would cut down expenses to an even greater level.

Many would suffer soon, for instance, credit card sales-people will face a much harder time in trying to sell a credit card to customer. The consumer would spend less on other things like clothing, mobile phone, food and even entertaintment in order to prepare a backup for their petrol drinker; vehicle.

Money Money ?
Can Redtone's Mobile Money come to dilute the complication ?

From current scenario, it seems that Mobile Money is even more costlier to merchants than credit card. Mobile Money levied a 1.525% merchant fees to its merchants. This is of course cheaper than standard merchant fees of 3%-6% levied on to general merchants expect for petrol stations.

Unless, they payment account is associated with debit card or saving accounts. Banks would charge its cusomter some percentage for intra-bank services from saving accounts.

The reason is simple, if anyone transacted with saving account and debit card, the bank is not able to generate any income as compared to credit card since they(banks) hope that you will not pay-all your credit card charges so that they can impose an interest of 1.5% or 18% per annum from users directly.

But Mobile Money actually has such facility where users can allow direct tied-up with their personal saving accounts.



Conclusion:
A tougher time for Malayian to anticipate and thus this will be a lousy Hari Raya for those celebrating because many like me would start worrying about our cash flow for the coming months and years.

When the spending power is weaken, the consumer market would collapse. Thus, you are are dealing with consumer product, you have the right to worry!

Nevertheless, perhaps it is good for competitor of Mobile Money such as Sapura's M2, to set petrol station as the focus group of their core activities.