The Growth Potential of Debit Cards in Singapore.
[Dissertation (University of Nottingham only)]
This paper starts by examining the evolution of the Singapore payments system from a historical perspective by reviewing the institutional evolution, as well as the development and adoption of some of the newest payment instruments. Two major trends in recent Singapore payment history are revealed, i.e. cash and check payments are being displaced by credit and debit card and other electronic mode of payments and usage of debit cards is seeing significant growth.
From the literature review, it is known that purchases made using debit cards surpassed credit-card purchases for the first time in USA history during the last quarter of 2008, giving the debit-card revolution a new push. With that, this paper aims to provide a better understanding of signature-based debit cards and specifically its growth potential in Singapore, post the Central Bank’s liberalization program to grant foreign banks Qualifying Full Banks (QFBs) status who were then allowed to compete more effectively with the domestic national banks in the payments arena and provide debit services on an EFTPOS network.
With the regulatory change to the debit card space, the Network for Electronic Transfers (NETS) was no longer the only debit card operator in Singapore. Debit card as a mode of payment has indeed been increasingly preferred for everyday purchases with wide usage and viewed as a valuable service if accompanied with rewards, cash rebates and discount benefits to cardholders. Hence, the competition for debit cards in Singapore increased in intensity with consumers experiencing greater choice and accessibility.
Next, we deployed the Michael Porter’s Five Forces and PEST analysis to examine the debit card industry in Singapore. While consumers are familiar with debit cards, its sustainable growth will come by increasing consumer education, awareness of the locations where it can be used and tailored marketing programs targeted at the right customer segment to encourage wider usage. It is evident from the questionnaire that differentiating the debit card value proposition by incorporating rewards, rebates and discounts can drive profitability and increase market share for banks, card companies and merchants in their respective ways. At the same time, consumers, by carrying less cash, lowers the risk of loss and benefit from the usage of debit cards through loyalty programs tailored for their needs.
Meanwhile, the bank issuers and card companies must continue to embrace technological advancements and innovations, leverage them to execute pro-active customer relationship management with all stakeholders in the value chain, including merchants, governmental organizations, regulatory authorities to minimize the disintermediation risks, potential litigations and any other implications on the fixing of pricing and interchange rates for debit cards. Bank issuers must also capitalize on this current positive orientation to debit cards to diversify their revenue streams and aggressively drive their businesses to the next level of sustainable competitive advantage.
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