Thailand: ATMS and price discrimination

Like Bali, Thailand’s economy is often associated with tourism. In actual fact, the sector makes up about 9.3% of Thailand’s GDP, with manufacturing eclipsing it by quite a bit, along with the financial services industry (Thailand is a stable Southeast Asian economy whose currency, and probably their banking system, is well-regarded regionally, possibly explaining why that sector is doing well). Still, Thailand knows that the travellers from Britain, Australia, Singapore, the US, and other East Asian countries are an important resource, and it’s developed a very decent infrastructure to welcome them. Getting around can either be very easy (for a price) or moderately easy (for very cheap).

One thing that does not come cheap, however, is money. I don’t mean in the traditional economic sense of opportunity cost (you have to give up time to get money), but in the literal sense, that if you want to get money from your bank or credit card, you will have to pay for the privilege. As of October 2017 the exchange rate is roughly 30 baht to the dollar. An ATM withdrawal at any ATM in Thailand, regardless of bank, will run you 220 baht, or about seven U.S dollars.

How do the Thais afford these ATM fees? 220 baht is the cost of four or five meals, seven rides in a songthaew (bus-taxi pickup truck that is actually a great idea), a motorbike rental for a day–it’s a fair bit, especially if you’re earning a median Thai income, which is about 237 USD, or about 8000 baht per month. Two withdrawals would be about 5.5% of your income.

The answer is simply that the Thais do not pay these ATM fees–extra fees are charged only for foreign cards–any nationality. My American and Korean cards were both met with the same charge, and the ATM openly tells you that the fee is for foreign cards. This is a perfect example of…


Price discrimination!

An economic phenomena where businesses charge customers different prices for the same good, dependent on their willingness to pay. Usually it’s hard to pull off, because supermarkets can’t ask for your tax return every time you enter the store and change all the price labels to the maximum they think someone of your income group would be willing to pay.

It’s getting easier of course–online retailers can profile you based on past purchases and other collected data, get an idea of what you’re willing to pay, and change the price on that copy of Capital in the Twenty-First Century all with an algorithm if they want to, and once we all get contact lenses with HUD screens projected in front of us that let us shop in augmented reality, supermarkets could do the same thing.

That’s all in the future though–for now, we’re stuck with price discrimination based on simpler types of profiling, which is where Thailand’s ATMs come in. Charging 7 USD for an ATM withdrawal from foreign accounts is a nearly foolproof means of price discrimination in the country. Here are a few reasons Thailand can pull it off.

First, barely anywhere in Thailand accepts credit cards, especially not at normal levels of buying things. 7-eleven stores have a minimum, I believe, of around 3-500 baht, or at least nine dollars. That sounds easy to meet, but in Thailand that’s four bags of chips, three beers, a coffee, and two or three candy bars–and that’s all for my lowball estimate of 300 baht. That’s not a normal amount to purchase at 7-eleven most of the time.

So because everything from street food to the post office is cash-only, you need it–and as a traveller, you typically run out faster than you think you will due to unexpected expenses or just saying “lets do this cool thing” one too many times. And the only way to get cash is ATMs.

Second, there is absolutely no competition–I’m not sure exactly why all the banks charge the same rate, but the two main possibilities are government regulation (basically a tourist tax) or price-fixing/collusion by cartelized banks. In any case, if you need cash, you’ve got a few banks to choose from and they’re all the same price. I always liked Siam Commerce Bank because it’s got a slick color scheme.

Third, tourists aren’t going to organize and get anything done about this–they’re here for a few weeks, and they want to see some cool temples. They’ll bite the bullet and pay, then forget it until the next time. Elasticity of demand for money among tourists in Thailand is pretty low.

Fourth, Thailand doesn’t need to see tax returns to know what price to charge you–if you come to Thailand, you’re already paying a significant amount for travel, signaling that you’re in a disposable income bracket that will absorb higher prices without a lot of hesitation. Thailand’s tourism sector has a less reputable part that basically makes their entire living off this assumption, and even the more reputable parts hike the official prices (for national parks, temples, museums, etc) way up for foreigners. And of course it’s true–even with the price hikes it’s very affordable for someone like me and my U.S dollars.