A 'one-cent two-cent' business: 40 years on, can payment provider NETS hold on to customers spoilt for choice?

SINGAPORE: In a time of credit card points, flashy new digital banks, trends like "buy now, pay later" and even Big Tech wanting a slice of the pie, the man at the helm of Singapore payment provider NETS readily admits it is tough to be the preferred mode of transaction.

In particular, NETS may not be the go-to payment option for larger ticket transactions or luxury goods – but it holds its own when it comes to everyday spending, said group chief executive officer Lawrence Chan. 

What started 40 years ago as a two-month pilot project to promote cashless payments at 39 participating outlets now has more than 150,000 payment points around Singapore, facilitating millions of transactions daily.

The introduction of QR codes and contactless payment has also led to NETS being used more often, with the company recording an increase in transactions every other month and hitting new milestones in recent times.

With the market for NETS continuing to lean towards smaller transactions, it makes scaling the business "extremely" important, said Mr Chan.

“When you come into payments, we like to say it’s a 'one-cent two-cent' business," he told CNA in an interview on the firm's plans in an increasingly competitive space.

HOW DOES NETS WORK?

The original idea behind NETS was to bring the automated teller machine or ATM experience to the point of sale. 

Just like using a Personal Identification Number to withdraw cash, customers can enter their PIN to pay for transactions wherever they are.

NETS was first introduced in 1985 for 10,000 ATM card holders from five local banks, which formed a consortium that founded the company. NETS is now owned by DBS, OCBC and UOB.

This group of people could make cashless payments at selected government offices, supermarkets, department stores and petrol stations.

It was part of a national campaign to promote cashless transactions and minimise cash ones, after it was estimated at the time that the government could save S$24.5 million (US$19 million) in labour costs.

The campaign had two other goals: Encourage Singaporeans to receive their salaries via direct credit to their bank accounts; and persuade them to pay bills electronically via the automated, cashless General Interbank Recurring Order or GIRO.

Today, NETS' unique advantage, according to Mr Chan, is being as ubiquitous as possible.

Most people know the firm for its debit transactions, but it also manages other payment networks in Singapore. Under the NETS group, Banking Computer Services is the operator behind PayNow, FAST and interbank GIRO.

Each time a transaction is made, merchants pay NETS a percentage of the transaction or a set fee per transaction. This still forms the bulk of the company's earnings.

“We’re definitely not the cheapest today, but neither are we the most expensive. Our price-to-value equation must be very strong,” said Mr Chan, who joined as group CEO in 2020.

He said his team has a huge responsibility to ensure its different payment services work when needed, and the firm is highly regulated for this reason. 

"We don't drive the competitive difference between one payment type or another," he said. "We are like a utility provider for payments." 

Yet NETS is also far from being the only payment option. Visa's payWave, Mastercard's PayPass - which enables Apple Pay and Samsung Pay - as well as app-based options like GrabPay have all become commonplace and represent a snapshot of the choices for customers.

Mr Chan pointed out that payment services are "not the means to an end" for many of these other firms, who are also in the lending business for instance.

For these reasons, NETS has to work hard to be at the most payment points in Singapore. And it remains important that "NETS" continues to easily roll off the tongue of the man in the street, as a payment option.

All of which increases the chances of transactions being carried out on NETS.

"We need to be everywhere, but at every point, we have to fight for our share," said Mr Chan, noting that NETS is more likely to have a larger share of transactions in the heartlands compared to a mall along Orchard Road.

“From a loyalty standpoint, definitely we understand that we cannot win every transaction," said Mr Chan. "But ... we will definitely be there to give that as an option to consumers.”

WHAT'S NEXT FOR NETS?

The company, which has more than 1,000 employees mostly based in Singapore, is exploring methods to allow merchants to use their own phones or tablets to accept transactions, through NETS software. 

It is also using data from transactions to help merchants understand their customer profile, said Mr Chan, describing this as another value proposition.

“For face-to-face merchants, it’s almost impossible for them to know who their customers are, to keep track of them,” he said.

The merchants can then use these insights to improve business and marketing strategies.

In 2023, NETS also started offering merchants the option to accept NETS payment alongside other international card schemes, in one contract.

Allowing other companies to ride on NETS terminals is another part of the business, said Mr Chan, which is only possible because it provides the whole infrastructure, making it at least a part of every transaction.

NETS has also expanded to cross-border payments, where either the buyer or seller is in Singapore.

For example, tourists from China, Thailand, Malaysia, Indonesia or India can use some of their country’s payment apps with NETS QR codes. Similarly, Singaporeans can make QR transactions overseas through NETS’ shareholder bank apps.

“We need to be resilient because we are very relevant to the community in Singapore,” said Mr Chan.

“We cannot take for granted that things just work. We have to be extremely paranoid to make sure that every transaction, when it has to work, will work.”