Stored-value cards problem
Updated: 2007-09-15 07:25
One of the things about Hong Kong that seems to impress my mainland friends most is the Octopus stored-value card, which allows the holder to conveniently move around the city on various modes of public transport, other than taxis.
For years, Octopus has had a virtual monopoly on Hong Kong's stored-value card business. It was perhaps for this reason that the real potential of stored-value card has never been fully exploited in Hong Kong. Popular as it is, Octopus' reach in the retail sector is still limited to convenience stores and a few shopping outlets.
The monopoly issue was brought to the forefront in recent months when holders complained about the failure to add value to their Octopus cards through the Electronic Payment System. Such complaints, which indicated Hong Kong people's diminishing tolerance toward the limitations of monopolies, moved the city's monetary chief Joseph Yam to write: "It is becoming increasingly clear that whether there is a need for separation of the management of the platform and the issue of stored-value cards is an important issue to be considered and debated."
The free market approach, long cherished by the Hong Kong government, has, ironically, produced monopolies in both the processing of stored-value cards and issuing the cards. Although Octopus has been widely seen as a success, the lack of competition can inhibit Hong Kong's ambition to develop what Yam describes as "the most efficient electronic money system in the world."
Of course, it all comes down to a matter of choice. "They (Hong Kong people) probably do not mind choosing between different stored-value cards, if offered a choice, to suit their own preferences," Yam noted in his latest column published on the Hong Kong Monetary Authority's website.
Many users are happy with Octopus because they don't intend to use it for any other purpose than paying for a ride in the subway or the bus. But, as Yam notes, there are those who want to use "one card for multiple non-financial purposes, while others (are) more interested in the convenience of uploading money easily and safely in the card from their bank accounts."
Some people might want to have a variety of stored-value cards for no other purpose than to show off their economic status. In that respect, stored-value cards are "arguably superior," according to Yam, to credit cards that don't necessarily say anything about the holder's net worth.
As consumers, we would want to be able to use any stored-value card we may choose at any store or restaurant we care to patronize. But we wouldn't be able to do that unless there is a common platform for processing the cards by different issuers.
Such a platform would also be welcomed by retailers because they would not be required to keep multiple devices needed to process the many different cards at each point of sale.
The logical approach would be to expand the present limited platform into an universal retail payment system, which would, in turn, encourage competition in card issuing. On this, the government has maintained an open mind. "I have no pre-conceived idea on the ownership and management of the common platform, provided that there are adequate checks and balances, transparently observed and monitored, to protect the public interest," Yam wrote.
It is not clear whether the cost of establishing a common stored-card processing platform, which could be undertaken by a consortium of banks, can be recovered from interest saved in money stored in the cards rather than in deposit accounts. Even if there is going to be a charge for using the service, the Hong Kong public is not going to fret too much about paying a reasonable price for the convenience of electronic money.
E-mail: jamesleung@chinadaily.com.cn
(China Daily 09/15/2007 page4)
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