Credit Cards
Sen Francis Escudero has filed Senate Bill 296 which seeks to penalize business establishments that charge more to customers who do not pay cash, but instead use their credit cards for goods and services ‘not only to protect citizens from unscrupulous practices of erring businesses’, but also strengthen their rights that will ‘lead to more consumer confidence and thus more robust consumer spending – a prime driver of our economy’ according to Escudero.
I hope the Bill is subject to the vigorous debate that it deserves. My own view that credit cards occupy an unwarranted parasitical place in the retail landscape.
The main issue is that credit cards impose a charge on the retailer. This charge is around 7 percent of the value of the sale. This means that the retailer pays a charge of P1,540 to the credit card company for a transaction involving P20,000. My experience is that, as a result, many retailers look favorably on cash transactions in preference to those implemented by credit cards. Similarly, retailers are happy to accept debit card transactions where they receive instant payment for the transaction since the customer’s bank account is correspondingly immediately debited.
Around 10 years ago, on a somnolent Sunday afternoon in our subdivision, my reverie was crudely interrupted by a representative of Citibank who knew my name and gave me a letter from the bank which thanked me for notifying it of my change in address. I did no such thing. I had no credit card, not even a Citibank credit card, and had no intention of acquiring one.
Which brings us to the purchase by UnionBank of Citi’s sale of its consumer business.
In December 2021, UnionBank acquired the Philippine consumer and retail banking assets of Citi. The reported price was P55 billion comprising a P45 billion premium for the business plus P9.7 billion in net asset value. In July, however, it was reported that the price to be paid by UnionBank had risen to P72 billion.
Yikes!
Reportedly, the volume of business was higher than when UnionBank’s bid was accepted. This apparently caused an increase of P17 billion in the agreed net asset value of Citi’s businesses.
Did UnionBank under-negotiate last December? Any acquisition carries risks and uncertainties. It seems, however, that UnionBank is extremely, perhaps overly, confident about the value of its Citibank acquisition.
A major factor in any purchase of one company by another is the impact it has on the staff of the cojoined organization.
How are the existing UnionBank employees going to react to the newcomers from Citibank? Will it be smooth?
I don’t think so.
Anecdotal evidence suggests a significant corporate culture difference between UnionBank and Citi. I sense that the former Citi employees may be overly assertive in the UnionBank environment. Around 1,700 employees, including some expats, from Citibank need much digesting by UnionBank.
Watch this space./PN
