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Now may be a good time to review how Hong Kong’s electronic
payments system should develop, believes Joseph Yam, chief
executive of the Hong Kong Monetary Authority. His call for a
review followed the release of findings by professional services
firm PricewaterhouseCoopers (PwC) that Hong Kong’s dominant
contactless card payments service provider, Octopus Holdings, had
erroneously deducted HK$3.7 million ($470,000) from some of its
customers’ bank accounts.
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The error, which was discovered in December 2006, involved
cardholders who had made unsuccessful electronic transfers to their
cards, despite the money having been deducted from their bank
accounts. PwC, which was appointed in January 2007 to investigate
the failures, found that between 2000 and 2006 15,270 cardholders
had been affected and had lost an average of HK$242 each. Octopus
has committed to refunding all those affected.
According to Octopus, which was established in 2005 by Hong Kong’s
major transport operators, 14 million of its contactless cards are
in circulation in Hong Kong, representing a market penetration of
95 percent among people aged 16 to 65. There are now 50,000 Octopus
contactless card readers in use in Hong Kong via which 10 million
transactions valued at a total of HK$29 billion are processed
daily.
Commenting on the dominant position Octopus has achieved, Yam said:
“Leaving it as far as possible to the free market, which has been
our approach, has produced a kind of monopoly in the provision of
the platform for debiting value and in the issue of a multi-purpose
stored-value card, in the form of Octopus, which, despite its
recent problems, has been very successful.”
However, he continued: “It is of course possible that the lack of
competition itself contributed to these [failed money transfer]
problems. Perhaps the answer is to introduce competition into the
card-issuing part of the business, while allowing the current
single and common platform [Octopus] to develop and possibly expand
into an essential piece of the infrastructure of our retail payment
system.”
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By GlobalDataIdeally there should be just one common platform for a number of
stored-value cards, both for the convenience of users and the
efficiency of the system, said Yam. Despite the technical problems
and the possible need for competition in the market, Yam concluded:
“The fact remains that what we now have in Hong Kong has the
potential to be the most efficient electronic money system in the
world.”
