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Plastic takes precedence

Young Thais are embracing cash cards, which issuers say are more convenient than cash and often packed with discounts.

Critics say the cards encourage excessive spending and are slower than paying with cash

Will young Thais become the country's first cashless generation? That's the goal of two prepaid cash-card companies, both banking on young people to convince their parents and peers that plastic cash is more convenient than paper.

Payment Solutions Company Ltd, which issues the OK Cash card, and Thai Smart Card Company Ltd, which distributes Smart Purse cards, say their largest group of cardholders are young adults.

Prepaid cards are becoming the currency of choice among college students, says Thawara Siripipat, aka Dr Pop.

"The obvious advantage is convenience, but it's also currently in vogue," says the popular sci-fi novelist and Assumption University student. "It's cooler to pay with a card than with cash."

OK Cash is focusing on young consumers aged 15-25. The card says 400,000 are now held by its targeted youth group. OK Cash cards are accepted where Visa and MasterCard can be used.

Smart Purse says half of its cardholders are teens. Smart Purse is accepted at 7-Eleven convenience stores and affiliated businesses.

Cardholders prepay whatever amount they want their card to be worth. A computer chip embedded in the card subtracts purchases from that amount when its owner passes the card over a sensor at convenience stores and shops. The amount can be topped up in stores that have the card-reading sensors.

Teens are the key to these cards, just as they've been for other technological innovations, including computers and mobile phones.

"Practically every new product starts with teens. They embrace innovation long before it becomes popular with the general public," says Thanin Angsuwarangsi, general manager of Payment Solutions. His company has launched different versions and designs of its cards to attract the trend-conscious teen market.

Thai Smart Card has spent more than Bt100 million on marketing and branding to promote its product. It has hired celebrities to pitch its card in advertisements.

Both companies are targeting students on college campuses.

"Within the next 10 years, prepaid cards will as common as ATMs are these days," predicts Thanin of Payment Solutions.

The cards' technology is similar to debit cards, which instantly deduct cash from a person's bank account. Debit cards have been popular in other Asian cities, such as Hong Kong and Singapore, for more than a decade.

"These cards are part of a global trend. Just like every chapter in human history, peoples' lifestyles change to embrace new technologies," says Chatchai Chatchaiganan, chief commercial officer of Thai Smart Card.

Cool and convenient?

The cards are being pitched as fast and convenient. There's no need to open a bank account and no need to carry cash. Discounts are offered to cardholders by some shops and businesses.

But the cards aren't always as handy as they're cracked up to being. Some retailers won't accept them and the scanners can take longer than simply paying with cash.

"My card isn't accepted by every shop and transactions take longer than when paying with cash," says a writer at www.pantip.com/cafe.

"I paid for convenience. But I'm not getting it," says another writer at www.torakhong.org/kratoo.

A third writer at webboard.mthai.com complained that some discounts and promotions are limited, "so not all cardholders benefit."

Similar complaints are common on web boards.

The card-issuing companies admit there have been glitches during the introductory period. "It takes time to install the hardware and get everything to run smoothly," says Thanin of Payment Solutions, noting that new mobile-phone services have first only been available in cities before spreading throughout the nation.

"We're working hard to get it right. We want it as soon as possible so we can keep increasing the number of cardholders."

The technology is very fast, but merchants and cardholders aren't comfortable with it yet, says Chatchai of Thai Smart Card.

"We're working hard to train store clerks. The technology takes only two or three seconds. But new users can take five or six seconds and that adds to the delay."

OK Cash says 250,000 merchants accept its card in Bangkok and other major cities in Thailand. OK Cash logos are normally posted where Visa and MasterCard symbols are hung.

Smart Purse card readers are positioned by the cash registers at 7-Eleven stores, although not every register has a reader.

Both companies are quickly expanding their alliances with merchants, particularly retailers that appear to young people, such as fast-food restaurants, convenience stores, bookstores and clothing shops.

Fad or long-term trend?

Some observers say cash cards will be just a passing fad if their issuers don't provide added value.

"This will be just another short-lived teen trend unless the issuers provide truly satisfying benefits," says Thanavat Pholvichai, Director of the University of Thai Chamber of Commerce's Economic and Business Forecasting Center.

"Teens currently are drawn to the new technology and might even collect cool-looking cards to be trendy. But if the benefits of these cards remain unclear, they'll stop using them," says Thanavath, who estimates that discounts of 5-10 per cent would be enough to build a loyal base of card users.

Chulalongkorn student Tharinee Sribenjachote already has a debit card that is accepted by most retailers. But the 20-year-old says she might get a cash card if she it can wrangle discounts.

Cash and debit cards aren't always as convenient as they're made out to be, says one Bangkok University graduate. "I don't live in shopping malls or convenience stories, where these cards are mostly accepted. I enjoy street food and shopping at sidewalk stalls which require cash," notes 22-year-old Panuchada Sirayootyothin.

Cautious or impulsive spending?

Some observers say that cash cards will encourage impulsive spending, much like credit and debit cards.

But the card issuers say there is less chance for reckless spending since the cardholder has to cough up the cash first. In addition, the chip on the cards records each purchase, so it's possible for users to track their spending.

"With every purchase recorded, users know what they've spent and can manage their money more wisely," says Chatchai of Thai Smart Card.

Thanin of Payment Solutions echoes his competitor by saying,

"The prepaid cards actually teach young people to be smart spenders. They can use cash or alternatively use the cards when discounts are available. Isn't this smarter?"

The University of Thai Chamber of Commerce's Thanavath says the cards can save money if card users are given discounts. But he notes that the cards will often be limited to retailers selling higher-end products that cost more.

Dr Pop doesn't buy the argument that the cards will encourage reckless spending.

"It's not about payment methods, but individual spending habits. Extravagant people tend to spend crazily whether it's prepaid cards or cash," he observes.

Thanavath says another reason that cash cards aren't necessarily beneficial is that the money isn't working for the cardholder.

"It isn't wise money management to put your money where it isn't earning income," he says. "If you put your money in a bank account, you'll earn interest. But in a card, you don't get any benefit unless there's a discount with each purchase."

And, at some point, users may grow dissatisfied with their cash cards without having exhausted their balance. "People might put Bt1,000 in their card, but spend only Bt950. They forget or chose not to spend the remaining Bt50," Thanavath says.

He adds that consumers should always gather as much information about any product or service before making a purchase. "The most important thing," he says, "is to be aware of the value of money."

Prepaid cash cards

What are they?

Cash cards have computer chips that allow users to fuel them with cash that they can later use to purchase products and services. They're like debit cards, only the cash value is stored on the card rather than in a bank account

Who provides prepaid cards?

Two companies now split Thailand's market.

Payment Solutions, owned by the Shin Corporation, launched its OK Cash card in October 2005.

Thai Smart Card, under owned by the Charoen Pokphand Group, first Smart Purse in December 2005.

What's the difference between cash, credit and debit cards?

Cash cards don't require a bank account. There is no minimum income or age for using cash cards. There is no minimum purchase. Funds are subtracted from the card as items are purchased.

Debit cards are tied to a person's bank account. The money is debited from the person's account at the time of purchase.

Credit cards bill a month's worth of purchases on a precise monthly cycle. The cardholder generally has the option of just paying a minimum balance, but the remainder is charged interest. Cardholders generally must be a certain age, hold a job and have a bank account in order to qualify for a card.

Where can you use the prepaid cards?

OK Cash: Stores with Visa/MasterCard and OK Cash logos.

Smart Purse: At 7-Eleven stores and affiliated businesses and service providers.

Pros:

More convenient than carrying wads of cash

No worries about credit-card bills or going into debt

No need to open a bank account

Discount benefits for cardholders

Cons:

You lose the cash if the card is lost or stolen. You can call the

issuer and put a stop on your card with credit and debit cards.

A fee is charged when you put money on your card.