Tan Kin Lian's Blog: Coffee shop and the bank

Tuesday, March 16, 2010

Coffee shop and the bank

I had a bowl of wanton noodle for $2.50 at a coffee shop. I looked at the ingredients that make up this meal - noodle, soup, meat, chili and more. I thought about at the labor that went into the preparation and the rental that has to be paid for the stall. How can the stall holder survive on the profit margin that goes into this bowl of noodles?

I then thought about the charge of $50 that my bank imposes on a late payment on a credit card and the charge of $80 to transfer a small sum of money. How much does it cost the bank to handle each transaction? It seems to take less labor that making a bowl of noodle.

The banks, which makes billions of dollars of profit a year, forget that many people in Singapore have to work 8 hours a day to earn $50, which is the amount that they charge for a small banking service. Perhaps our Government, which gives the licence to the bank to operate the essential banking service, also forgets this point.

We cannot rely on the free market to determine the banking fees, as there is virtually no competition and the banks are happy to operate a cartel on these excessive charges. The Government has to regulate the fees charged by banks for essential banking services to be at a reasonable level.

Tan Kin Lian

18 comments:

Kevin FM Lim said...: Hi Mr Tan,
Well said. credit card-related charges in particular are out of this world.
I've started carrying lots of cash when I travel as the exchange rates charged by banks nowadays bear are far worse than what you get at money changes or bank counters, and the spreads seem to be getting wider and wider.; March 16, 2010 8:46 AM
Anonymous said...: Why only you speak out for our normal people? If there are more people like you, Singapore will be the dreamland for everybody.; March 16, 2010 8:55 AM
Anonymous said...: Look, i'm surprised you didn't know any better.

it's expensive to run a branch banking network.

it's not as if the foreign banks hasn't tried to undercut the local banks by offering pure internet banking which offers higher deposit rates and lower charges.

but take-up rate has been poor as Singaporeans still prefer the convenience of a branch network.

go figure. people say one thing and do another thing.; March 16, 2010 10:09 AM
Anonymous said...: hi, the cost of raw material is usually very little. flour, water, meat (usually chicken or pork), chili, veg, cost less than $0.40 per bowl because we buy in bulk. labour is intensive but only in the preparation requires work. the killer is the rent.

everyday if can sell 80 bowls, we can break even. the rest is profit. lunch time usually can break even already.; March 16, 2010 10:38 AM
Anonymous said...: The banks are raping us, making us poorer and themselves richer every passing year. The interest they pay for our savings is not even enough to offset food and housing inflation. The CEOs draw huge obscene compensations although they are monopolies. They charge exorbitant interests and fees (check out the latest fee revisions and depositor interest rate revisions). Leaving the savers and retirees punished. We the citizens of Singapore ... based on justice and equality ... to achieve happiness, prosperity and progress for our nation? ... Maybe. After the next GE.

Arm66; March 16, 2010 10:49 AM
Anonymous said...: Right wing neo-Conservatives and Republicans in the USA argue for less regulations, less tax, let the free market decide. This is nice sounding but really a con job. It simply translates to a transfer of wealth from the masses to a few. In the Singapore context, it is even worse. What sort of free market is there to speak of in a landscape dominated by GLCs, and government linked big boys and affiliates. The neo-right PAP government under LHL and GCT has forgotten the need to rein in capitalistic excesses resulting in greater wealth for a few and greater inequality in Singapore.; March 16, 2010 11:28 AM
Anonymous said...: Mr Tan,
Clementi web market is now closed for innovation, and according to what I have spoken to stall holder there, I am surprised that the gov offers those stall holders a temporary market with location that far away from Clementi Central for whopping $10,000 per month. In the end, the stall holder rather not continue their business and wait to see how it goes when the web market is opened after few months of innovation. So the temporary is not built due to lack of interest by stall holders. But they definitely expect rental price to rise ridiculously.

I wonder how the fish these people can survive for living, while the gov milks and sucks the blood out of their hard work.; March 16, 2010 11:33 AM
Anonymous said...: REX comments on Anon 10.09 am post.

You said:
it's expensive to run a branch banking network.

I ask :
Doe that mean it justifies to fleece the consumer to recover from the large expenses?
What kind of logic is that?
Shouldn't the solution be to find innovative ways of serving the customer, differentiate your product from others, bring more value and quality to the consumer to beat the competitors? Failing which, well, the bank deserves to shut down. This is free competition.

Resorting to fleecing customers is a sign of bankrupcy of ideas in the perpetrator's convoluted and sickened mind.

rex; March 16, 2010 2:23 PM
Anonymous said...: I think it is not so much to "fleece" the customer as much as to recover the cost. How much does a bottle of coke cost? why is it selling at $1.50 in kopitiam and $2.00 at 7-11s?; March 16, 2010 2:55 PM
Anonymous said...: REX comments on Anon @2.55pm

We are talking about two different things.

For the Coke analogy which you cited, consumers have a choice to buy from whoever sells cheaper and doesn't "fleece".

For the case in point, which is the banks alleged over charging for late payments, and international transactions, there is no choice, because according to kin lian all the banks are in some sort of "cartel" in charging pretty high overheads for simple mistakes made by customers.

I think a compromise solution could be that the banks could levy a nominal charge on the first mistake made by customer. On the second mistake made by customer, whack!

rex; March 16, 2010 4:15 PM
Anonymous said...: Why use a credit card? You can always use a debit card or NETS right?; March 16, 2010 4:54 PM
Anonymous said...: REX,
you don't read very well.

if consumers want cheaper banking services, they do have a choice in the form of pure internet banking (your bank a/c will not be serviced at a branch).

the thing is, the penetration rate is abysmal even though singapore has one of the highest broadband penetration rate and literacy rate.

talking abt international remittance, you could choose to pay $80 to remit $2,000 to china or you could do it at ICBC which charges $20.; March 16, 2010 5:14 PM
Anonymous said...: hi rex,

1. you can choose not to use a credit card;

2. you can choose not to be late;

3. you can choose to use GIRO for your payments;

4. you can choose to use a dedit card;

5. you can choose to pay cash or cheque;

6. you can pay by NETS;

7. you can choose to keep your needs simple and not buy expensive things, then no need for credit card.

The fees are imposed but you can choose not to use the card at all and the fees do not apply. Same for coke. It is there, but you can choose not to buy it right?

Same analogy.; March 16, 2010 5:26 PM
Consultant said...: Welcome to singapore's economy. Protectionism for the rich and capitalism for the masses. Where the rich get richer, and the poor, well, good luck to them.

The elites, the rich, the high income, and some middle-income too, will say there is nothing wrong with the system, improves profits and shareholders get the benefits.

The rest of the stakeholders, the poor, lower income and some middle-income are left to make do as they can. They can complain and make noise, but whatever they say falls on DEAF ears. Because the elites know, the masses will still go to work, keep their heads down, still pay the fees, still accept the charges.; March 16, 2010 5:36 PM
Anonymous said...: REX comments again,

To those two anon. above.
Actually this matter has got nothing to do with me. I'm never penalised because i do use giro so I never pay late. I also don't remit money overseas so i don't see the high charges.

I was only commenting because Mr Tan felt he was fleeced as per his post. You can offer your advice to him, he's the one who might consider your advice as per your posts.

And i thought, yeah, the charges are quite high, why is the penalty so high? It's one of those things, like, you are unlucky, you get fined $70 for parking double yellow line for just only 2 minutes, if the traffic cop is around.

I thought a bit of leniency should be reasonable in these matters without compromising on the operations.

rex; March 16, 2010 9:42 PM
Falcon said...: That is the reason why I do not drink coke or any drink at Kopitiam, let alone buy from seven eleven. I can get coke at forty cents. Anyway coke is bad for our health so I drink plain water and it is very cheap.
The banks try to charge high fees but they could not do that to me. I do not even have to pay credit card annual fees. Just because they say they want to charge you does not mean that you have to be charged. As for the low interest rate, I put it in a bank that pays me more. I used to get over 5% but since the devaluation of the sterling it has gone down. I still get over 2% for my RMB, with the potential of it appreciating, thanks to the efforts by President OBAMA and the American congress. In short, I agree with Mr Tan that the bank charges are excessive, but since these are commercial decisions that customers accept at the point of opening their accounts, they are legally binding. Just like the mandatory death penalty, even the judge, even if he wanted to, will not be able to make an exception as it is legally enshrined in the constitution. This is why it is important, just like a jury needs to be made up of people from all walks of life, so should our lawmakers and members of parliament. It is not good to have people who are from the same mould to govern as they will never be able to empathise, no matter how smart they are, and to be able to see things from different angles, since the view from high horses are the same.
The banks high charges can be circumvented, by reasoning with them. The more difficult problem is how to ensure we have a pluralistic government, so that there will always be a voice for the underpriviliged, the weak and the conned or bullied.; March 17, 2010 11:51 PM
Unknown said...: I agree with Falcon.

You cannot stop people for imposing high charges. There will also be a reason (to whatever they deem fit) but we have choices to not incur such charges.

Just like traffic offences, I agree with Rex that $70 for parking double yellow line is too much. Same for $120 and 8 points for accidentally missing a red light.

Or if I am late for a concert, I have to wait for intermission before I can enter, even though I may have valid reasons.

To avoid such things, I would observe and adhere to the rule.; March 18, 2010 12:51 PM
Anonymous said...: There may be occasions when we have no choice but to use the services of a bank. This requirement may be from the other party in another country, e.g. to pay or remit money to your son/daughter who is studying overseas, or settle payment for medical/accidents.
It may not be for "greedy" reasons.

Banks can reduce charges, and they should.

All the reasons given by the banks that such remittance is costly is pure non sense.; March 18, 2010 7:00 PM