Nuffnang passing operational cost to bloggers?
Ming, co founder of Nuffnang, saw that article and replied in the comment box, giving more details on how they derive the $1 transaction fee.
I understand this is an unpopular decision, but in the face of significant costs which I will now break down and reveal to you, this decision has been taken by the management in consideration of long term viability.
The main bulk of costs comes in the form of cheque processing. This is something you can openly verify. UOB as with every other bank now, is charging 50 cents per cheque processed.This is in addition to the cost of the cheque book which they also charge for.
In addition to this there is the postage fee, which by 1st local is 25 cents each (for a stamp). The envelope costs 20 cents each. This brings it up to 95 cents, which means 5 cents for the paper, ink and labour. Labour includes time taken to print out the letter, verify the amount, pack it, and send it off.
Labour is more or less subsidised and free in this instance.
One mistake I will admit to making and can rectify immediatly is that we did not give any lead time for implementation. As a result, this action will be delayed till november. I will update all nuffnangers in the next community update.
I look forward to your continued support.
Am glad that Ming steps out and explains the $1 fee. But as I was reading, I felt that something was wrong.
Lets breakdown the $1 transaction fee first.
$0.50 – Cheque processing fee
$0.25 – Stamp
$0.20 – Envelope
$0.05 – Paper, ink and labour
Ming is correct to say that the operational cost has gone up recently. With effect from 1 Oct 2007, UOB charge $0.50 for every cheque processed. The first 30 cheques will be waived. But lets just assume that Nuffnang have their own bills to pay too and used up the 30 cheque quota every month.
But the rest of the items are existing operational cost. Stamp, envelope, paper, ink and labour charges have been there since day one. They are nothing new. Was there an increase in prices lately? If there isn’t, then these items shouldn’t be added into the new transaction fee. In fact, when deciding the payment structure, these items would have already been put into consideration. Why is Nuffnang passing these charges to bloggers now?
So technically speaking, the increase is only $0.50. How much additional operational cost is that? Currently, there is a total of 2500 Nuffnangers. Assuming 10% of the Nuffnanger cashout every month, the increase in operational cost will be just $125 per month. Surely a company of Nuffnang size is able to absorb this little increase in operational cost.
And if you really think about it, do they really have 250 cashout every month?
The saddest part of this whole incident is not about the $1 transaction fee. It is the mentality of the management. $1 is a small amount and I'm sure everyone can afford it. But when operational cost goes up, instead of finding ways to cut cost, the management decides to pass the additional cost to consumers.
Well, passing the cost to consumers is easy. That's what our public transport companies always do.