Bank card row ignores consumers' role
(China Daily)
Updated: 2004-06-15 13:48

The dispute between the Shenzhen retail industry and local banks about a bank card transaction charge has attracted much attention from the media nationwide. After a series of failed negotiations to halve the charges to 0.5 per cent, local retailers boycotted the use of credit cards for two days earlier this month. The stalemate between the two sides, unfortunately, has become a fiasco, as both claim to have the upper hand. The following are excerpts of media comments:

China Youth Daily: Bank card users could contribute to solving the current dispute over transaction fees.

Although some government departments have intervened in the dispute, the problem is yet to be solved.

The government could mediate but should not coerce any one party into submission.

An interesting fact in the altercation is that there seems like there is no room for negotiation.

Both sides have insisted that any change in the charge would lead to a loss. Such a situation goes against the normal laws of a transaction.

In simple economics, a transaction means the welfare of both parties is increased.

Generally, there is a range for pricing, with the floor being the supplier's production cost and the ceiling being the production cost to the consumer if they were to produce the product or service by themselves.

If there is really no room for negotiation regarding the bank card transaction fee, the only explanation is that the bank card service is profitless.

Judging from the financial service practices and development trends worldwide, however, it can be said that such an assumption does not hold water.

In the dispute, a third group - the users of the cards - have been ignored.

The additional profits gained by card users are obvious. Thus, consumers who use bank cards should be asked to pay some money to the providers of such services. This could contribute to breaking the impasse.

The fact is that consumers are not paying transaction fees but are gaining the additional gift of a discount for making purchases with their cards.

Maybe if consumers just paid 0.1 per cent of the total transaction fee, lowering the rate paid by retailers, the current deadlock could be broken.

Southern Metropolis Daily: "When the city gate catches fire, the fish in the moat become the victims," says a Chinese adage, which can describe the situation being faced by consumers as friction between retailers and banks in Shenzhen continues to escalate.

Some retailers plan to raise commodity prices bought on bank cards by 1 per cent to cover the banks' charge.

The retailers' move is not unexpected. It is clear to all that the proposed price hike is an attempt to compel banks to back down - and many consumers are sympathetic to the plight of retailers.

The attitude of the banks, in contrast, is upsetting. All the arguments retailers made to banks, including their meagre profit margins, the ratio of bank charges to their revenue and the lower rates charged in other major cities, were dismissed.

So far, Shenzhen's banks have not made public a serious explanation about the transaction charge except one cold answer, that there is no room to lower the fee.

But who can believe this? The rate in Beijing and Shanghai is 0.5 per cent, and banks in Shenzhen can still make money if they lower their rate to that level.

They seem to be reluctant to give up vested interests by halving the rate.

But when accusing retailers of breaching their contracts, they forget that in a market system all prices can be negotiated.

Despite retailers' plans for a price hike, consumers are mostly in favour of retailers rather than banks. This is not only because of their instinct to sympathize with the weak, but also a result of the banks' arrogance and defiance of market norms.

If retailers work out effective measures to get people using cash, consumers will follow the practice. After all, bank cards are not indispensable.

In this way, banks will lose. Consumers may even return their cards due to the increased inconvenience and cost for using the cards.

It may be up to the government to solve the problem - but the banks should be contemplating the wide dissatisfaction from within the market.

Although State banks still enjoy a de facto monopoly position regarding banking services, foreign competitors will get national treatment in a couple of years as a result of China's World Trade Organization promises.

Then, it will be easier for consumers to opt out of poor banking services.

Domestic banks cannot turn a blind eye to market sentiment forever.

Beijing News : The government should get retailers and banks back to the negotiating table and provide professional references to conclude the issue.

Both retailers and banks are sticking to their guns while government departments have remained quiet.

In market economy, disputes over interest rates are common. The point is how the disputes are solved.

Settling differences through negotiations among concerned parties or through administrative intervention will lead to different results.

In Shenzhen, government departments have followed the practice of the market economy and not intervened directly. A solution needs to come through negotiations between the parties concerned.

It is a controversial issue and no matter how the rate was established, retailers are justified to seek negotiations to adjust it.

The current stalemate harms the interests of all parties concerned. And it is time for the government to roll up its sleeves.

Related departments should persuade the bank and retail associations - the two protagonists - to get back to negotiations, and nothing more.

They should not pressure either side.

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