Published on August 7, 2007
Many Thais have lately experienced the convenience of using a new plastic card to pay for everyday needs, maybe at the 7-Eleven convenience store around the corner or at an SF Cinema. What is perhaps the final step towards a cashless society has come with the launch of Smart Purse, a payment system designed to free people from the need to carry coins and banknotes.
Rather than being a cost to the cardholder, Smart Purse makes its money from a small surcharge per transaction paid by retailers.
Smart Purse has been developed and released by Thai Smart Card, a joint venture involving CP Seven Eleven and seven partners: Bank of Ayudhya, Krung Thai Bank, The Government Savings Bank, Siam City Bank, True Corporation, Loxley and leading information-technology firm SVOA. Its registered capital is Bt1.6 billion.
What few people realise is that the innovative digital payment system was more than eight years in the making, and Thai Smart Card's assistant chief executive for business and marketing management, Chatchai Chatchaiganan, guided it from initiation to roll out.
The idea of digital money that led to Smart Purse had its origins nearly 10 years ago, when 7-Eleven stores were having problems with handling cash because of regular robberies. At the time, Chatchai was in charge of Sunny Supermarkets, the CP Group's now-defunct supermarket chain. He was given responsibility for developing the new digital money idea.
He immediately spent three months revising the plans proposed by a business partner. He foresaw that a digital purse for micro payments would have to be deployed on a massive scale, in terms of both cardholders and card receivers, or retailers than would accept the card for payments. This meant the initiative needed partners of considerable strength, and CP Seven Eleven didn't want to do it alone.
Chatchai started to sell his idea to several bankers, but struck immediate scepticism about how their businesses and that of the digital money could be convergent. He spent a lot of effort making the bankers understand the business model, how they could join the business, and how they would benefit.
"We needed to be calm, to explain thoroughly to 30 bankers so they understood and saw the trend towards digital cash. The big thing was, we needed to make them trust us, that we did not want to complete with them in financial services. We simply invited them to join in the development of innovative services, and we called it digital money, or 'Smart Purse'," Chatchai says.
After repeated efforts, some bankers began to respond favourably. They were willing to joint the project. In 1998, when the financial crisis was biting down hard on banks, Chatchai succeeded in getting three banks to sign a joint memorandum of understanding to undertake a feasibility study on the digital purse project, in three areas: marketing, financing, and technology.
The study found that between Bt300 million and Bt400 million was required to establish a consortium to invest in and operate the digital money project.
"It needed a huge investment from each party, but it was in a time of economic crisis," Chatchai recalls. "Some partners moved out and some moved in. Finally, in 2001 we got eight companies to set up the consortium to run the smart card project with a total investment of Bt15 million. We hired consultants to study legal issues, business models and financial models, as well as conducting a market survey."
After that, each party was required to invest in setting up a joint venture company to operate the project commercially. But because of the financial crisis, each partner extended its investment for two years, Finally, in 2005, all of the partners invested to establish the joint venture Thai Smart Card.
In the meantime, while investment difficulties were working themselves out, the technology changed. Chatchai had to revise and redesign the project's technology platform from a contact-based chip card to a card having a dual - contact and contactless - interface.
Late in 2005, the pilot test of Smart Purse was introduced in selected 7-Eleven stores. Last year, the new payment system was launched in 3,300 7-Eleven outlets around the country. In May 2006, it was introduced to business partners.
"Once we settled all matters - setting up the company, selecting a business model, and marketing - we went ahead immediately. Our strategy is that we do not do it alone, but we join with partners. We commit to grow and go ahead together. In this way, we can distribute 'Smart Purse' widely," Chatchai says.
He points out that Thai Smart Card is an infrastructure business requiring huge investments and a lot of effort in the beginning stages, maybe five years. After that, once it attracts sufficient users to reach "critical mass", the number of cardholders and receivers will leap, and there will be strong business growth.
Up to now, about 8,000 Smart Purse terminals have been installed in all but 600 of the country's 3,924 7-Eleven convenience stores and in 2,500 other businesses, such as SF Cinema, A&W, In&Out, EZ'S, To-Sit and MBK.
Last year, the company distributed about 1.1 million Smart Purse cards.
Under its business plan, by the end of this year, there will be 2.1 million cards in use and by 2010, there will be at least 5 million cards and 30,000 reader terminals.
Beyond 2010, Chatchai foresees the possibility of doubling the number of cards because people will have become a lot more familiar with the system and there will be many more partners, both retail receivers and card issuers.
The very nature of the system demands that the number of cards issued and transactions conducted must be maximised. Thai Smart Card's revenue comes from a 1-2-per-cent surcharge paid by retailers for transactions.
At a personal level, Chatchai reveals his fondess for an ancient Chinese board game, called Weiqi in China and Go in Japan. It is widely appreciated for its simple rules while remaining complex. Chatchai says he not only likes playing it, but also uses tactics and thinking from the game in his business environment.
Along the long eight-year road to the launch of Smart Purse, Chatchai admits to have felt discouraged at times, but adds that he is not afraid of difficulty and tough tasks. He believes each time he is confronted by a problem, he will put all his efforts into studying it until he sees the problem as an opportunity. So it was when CP Seven Eleven was troubled with a cash-handling problem, and Chatchai glimpsed the opportunity for a new business.
"Working for the CP Group, I've never been given the easy jobs. I always get the tough tasks and must be a pioneer, wading through a new arena of business opportunities. 'Smart Purse' is the toughest and most difficult assignment I've ever been given, but I'm very proud that my boss gave me this job," Chatchai says.
The pride is doubtlessly mutual. There are plans to list Thai Smart Card on the Stock Exchange of Thailand in the next three to five years.