The head of Taiwan’s largest transit and retail stored-value card contends that open-loop payments will not make a significant impact on the island nation, given Taiwan’s strong closed-loop card programs and the expense of rolling out acceptance for credit cards and credentials. But more Asian markets, including Hong Kong, plan to adopt open-loop payments.
According to Taiwan banking regulator, FSC, of the three main e-purse cards accepted nationwide in Taiwan, EasyCard, iPASS and icash, EasyCard had 76% of the retail sales volume.
• EasyCard (Taiwan)
• Octopus (Hong Kong)
• MTR (Hong Kong)
• KRTC (Kaohsiung)
The head of Taiwan’s largest transit and retail stored-value card contends that open-loop payments will not make a significant impact on the island nation, given Taiwan’s strong closed-loop card programs and the expense of rolling out acceptance for credit cards and credentials.
Ting Chen, chairwoman of EasyCard Corp., which owns a large majority of both transit fare collection and retail e-purse transactions in Taiwan, noted that one small metro system that has already tried open loop in Taiwan and has seen low adoption so far.
Chen, speaking on the sidelines of this month’s Transport Ticketing Global event in London, told Mobility Payments that the experience of Taiwan’s third largest city, Kaohsiung, in the south of Taiwan, demonstrates that open loop is a tough sell for Taiwanese.
“It’s only 3% usage and not to mention for the first half a year, it was completely free; they’re still not using it,” said Chen.
Of course, EasyCard Corp. naturally would not welcome a competing technology potentially interfering with its dominant position in fare-payments acceptance, especially in Taiwan’s capital, Taipei. EasyCard has 100 million cards on issue, which can be used nationwide on public transit–not to mention at thousands of merchant locations that accept the EasyCard e-purse, mainly for micropayments.
But Chen and other heads of closed-loop transit/retail payments schemes that have boasted of a stronghold in Asia for years could find themselves increasingly isolated if they continue to resist supporting an open-loop option.
Just this month, transport officials in Malaysia and Hong Kong said they would adopt open-loop payments, to complement to their much-used closed-loop transit and retail e-purses, Touch ‘n Go and Octopus, respectively.
The move by Hong Kong’s Mass Transit Railway, or MTR, is particularly noteworthy. The agency owns two-thirds of the ubiquitous Octopus card, which is accepted at more than 70,000 locations, with 30 million cards on issue for a Chinese territory with only 7.5 million people.
MTR said it would roll out open-loop payments on its 10-line metro. It and transit agencies in Malaysia follow Singapore and Bangkok in offering open-loop as an option for riders, despite their commercial retail payments businesses anchored by transit cards. Asia, as a region, still lags far behind Europe in rolling out open loop.
However, large agencies in Taipei, like Tokyo, among a few others in major Asian markets, remain holdouts. They have not signaled a move to open loop. Around 30 small transit operators in Japan are supporting open loop, at present.
Poor Take-Up in Kaohsiung
Open-loop fare payments have so far only launched in a few places in Taiwan, including the airport rail line serving Taipei and in Kaohsiung, where the Kaohsiung Rapid Transit Corp. launched open-loop payments in January 2019 on its two-line metro. The rail operator got help and possibly some funding for the open-loop rollout from Mastercard.
The Kaohsiung Metro now accepts contactless credit cards from five payments brands: Visa, Mastercard, JCB, American Express and China UnionPay, along with credentials from these brands on NFC devices supporting such services as Apple Pay and Google Wallet.
But Kaohsiung riders can only pay for single rides with open loop. And the Kaohsiung Metro also accepts a range of other fare media, including several period passes, paper single tickets, QR code-based mobile-ticketing from Taiwan’s popular e-payment service, Line Pay; as well as a QR code-based UnionPay app. Most notably, the metro takes three stored-value cards, which are accepted nationwide, including EasyCard.
In addition, only the city’s metro, not its buses, accept open loop.
Neither the Kaohsiung Rapid Transit Corp., KRTC; nor Mastercard; responded to a request for comment from Mobility Payments on the low open-loop adoption rate.
Taiwan does not have a strong debit card market. And Chen noted that while Taiwanese banks aggressively market credit cards, a significant number of Taiwanese, around eight million, do not carry them. She did not give the source of that estimate. But according to Taiwan’s banking regulator, the Financial Supervisory Commission, there were only 36 million active credit cards on issue for an adult population of roughly 19 million. That’s fewer than two credit cards per adult. One study found Taiwanese that do carry credit card have an average of four in their wallets.
And Chen noted that ridership of the Kaohsiung Metro remains low.
“(Kaohsiung residents) still find it more convenient to use motorcycles (motor scooters),” she said. “They are not converting to public transit because of EMV.”
However, open loop was unlikely to increase ridership on the Kaohsiung Metro, which has been disappointing for years. Annual ridership peaked at 65.4 million in 2019, below projections made when the metro opened in 2008. And ridership has been slow to recover from the pandemic. The metro only delivered a total of 41 million rides last year, around 63% of 2019 ridership levels.
By comparison, the much larger Metro Taipei had annual ridership of 572.3 million on its five main lines in 2022, 72% of its 2019 ridership. As of last month, the Kaohsiung Metro provided only 148,000 rides per day, on average, compared with just over 2 million per day in Taipei.
The vast majority of fares in Taipei are paid for by stored-value cards. There are three cards accepted, with EasyCard accounting for a large majority of transactions. Customers can store their 30-day commuter passes on EasyCard, as well.
And as in other major Asian markets, including Japan, South Korea, Thailand, along with Hong Kong, EasyCard’s fare-collection activities are part of a commercial retail payments business.
According to Taiwan banking regulator, FSC, of the three main e-purse cards accepted nationwide in Taiwan, EasyCard, iPASS and icash, EasyCard had 76% of the retail sales volume. That was as of January 2023, the latest report available. EasyCard had just under $NT4.7 billion (US$154 million) in retail sales that month, up by 9.1% from a year earlier.
EasyCard also has a growing e-wallet app, though it continues to trail market leaders Jkopay and Line Pay, the latter a service by Line Corp. which provides Taiwan’s much-used messaging app.
The EasyCard payments business is one more reason that the city of Taipei, which controls EasyCard and the Taipei Rapid Transit Corp., would likely think twice before approving open-loop payments. Transit keeps EasyCard at the top of wallet for retail payments. According to the FSC, 10 million EasyCards were used for retail transactions in January alone.
On the cost side, Chen contended that it could take many years to equip all metro and bus validators to accept EMV, all to yield a “marginal impact” in terms of the share of trips paid for with open loop.
While transit operators could wait until the replacement cycles for their validators were up, Chen insists that Taiwan is not like European countries, where fare payments methods are “fragmented.” This fragmentation makes the open-loop option more appealing, while Taiwan already has three closed-loop stored-value cards that are integrated with transit and retail terminals throughout the country.
Of course, Chen acknowledges that she approaches the topic of open-loop payments with a bias toward closed-loop payments and the status quo.
“I know I have my position to defend on this, but I really don’t see a huge impact for open loop in Taiwan,” she said. “Maybe other markets (in Europe), yes.”
But if Hong Kong and Malaysia are any guide, Chen’s position will soon be a bit more lonely than before.
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