The law, which took effect Jan. 23, allows companies with a capital investment over NT$300 million (US$9 million) to issue smart cards for cross-industry applications. This means a single card may soon be all consumers need to pay for most small purchases islandwide.
Under the previous rule, businesses in non-banking sectors could issue prepaid cards for transactions at their own points of sales only. Dozens of such cards have been issued on the island, including President Chain Store Corp.'s icash cards that can be used at 7-Eleven convenience stores, and the ETC cards launched by Far Eastern Electronic Toll Collection Co. Ltd. for drivers traveling on the country's highways.
Issuers of stored-value cards generate profits by collecting transaction-processing fees from merchants signed up with their payment schemes. Market analysts estimate that the value of the country's e-purse transactions could total NT$10 billion (US$294 million) a year. In addition, the cash deposited by cardholders represents a free loan to card issuers. Given that the average amount stored in such cards ranges between NT$200 and NT$500, the money can add up to billions of New Taiwan dollars.
As Taiwan's largest issuer of prepaid cards, Easycard Corp. is widely expected to gain the lion's share of the newly created business opportunity. The Easycard is primarily used for automatic fare collection on the public transportation systems in Taipei City, Taipei County and Keelung City, with limited functions as an e-purse that can be used to pay parking fees and make purchases at selected stores.
As of December 2008, more than 12 million cards were in circulation and generated more than 3 million transactions on average per day.
Citing Hong Kong's Octopus Card and Singapore's EZ-Link Card as examples, Easycard Corp. Chairman Sean Lien said that stored-value cards are the perfect payment method for transactions under NT$500 (US$15). The company intends to team up with merchants from different sectors to expand the Easycard's reach. As early as June, commuters will be able to use it at over 5,000 stores in northern Taiwan, according to Lien. "Our ultimate goal is to have the card welcomed throughout the country," he stressed.
Not only do prepaid cards save consumers the trouble of carrying loose change around, they also have several advantages credit cards do not offer, according to Lin Yu-lin, a public relations representative at the company. "Unlike credit cards which may encourage irresponsible spending, no debt will be incurred using prepaid cards," he pointed out. Since children are allowed to use e-purses, parents may store their allowances on them, Lin noted.
Other than street vendors, traditional markets and eateries that normally do not accept plastic money, most of the country's transactions involving small amounts take place at convenience stores, fast food restaurants and coffeehouses. Many of these merchants are not equipped to accept monetary cards, while others have invested in their own cash-on-card solutions with operating systems different from Easycard's. But Lin said that such technicality would not be an obstacle to forming alliances. "What is more important is to come up with a win-win strategy for all parties involved."
Another strong contender in the race is President Chain Store Corp., which launched icash in 2004 and has issued over 7 million cards. When asked to comment on the potential business opportunity and the proposed partnership with Easycard, a company official said that President is open to any possibilities but that no definite plans have been set yet.
In addition to Easycard and President, the country's two other issuers of stored-value cards are also set to benefit from the new rule. However, neither of these companies--Kaohsiung Rapid Transit Corp., which issues the I-Pass card for traveling on the city's mass rapid transit system, and Taipei's Far Eastern Electronic Toll Collection Co. Ltd.--have announced any major plans to expand into the e-purse business so far.
Tina Chiang, senior vice president and general manager of MasterCard International Inc. for the Taiwan and Chinese mainland markets, pointed out during a telephone interview that there is a distinct difference between credit cards and stored-value cards. The latter are used mostly for small transactions, with convenience stores as their primary target. As a result, they do not appear to be an immediate threat to credit cards.
"Besides, credit cards are much more than mere electronic purses. They are accepted throughout the world and offer many more advantages," she added.
Write to Meg Chang at meg.chang@mail.gio.gov.tw