While operators of transit fare-collection systems in London, New York, Washington, D.C., and a few other places consider enabling riders to pay fares with contactless cards issued by banks, no similar push to accept open-loop payment cards exists at the pioneering Octopus Cards Ltd. scheme in Hong Kong, according to one executive. Octopus, one of the largest fare-collection systems in the world, has been building its system and brand since 1997, and more cardholders are using the cards to make retail purchases, says Brian Chambers, head of Octopus Knowledge, the consulting arm of the holding company that owns the Hong Kong transit card scheme. "What's the effect of losing your brand, losing your customer relationship?" Chambers tells CardLine Global sister publication Cards&Payments. Octopus and Citibank earlier this month announced the planned launch of the first co-branded credit card that carries the Octopus application. But that application is separate from the Citi credit feature. Octopus estimates it has 17 million cards in circulation that cardholders use more than 10 million times each day. The transactions total more than HK$85 million (US$10.9 million euros or 6.9 million euros) per day. While estimates vary on the share retail and other nontransit transactions make up, Chambers places it at 30% of the total value cardholders spend with the prepaid Octopus cards. He says about 2,500 merchant locations accept Octopus. Those are part of roughly 50,000 terminals where users can tap their cards to pay, most of them on buses and at gates of subways, ferries and other modes of transport throughout Hong Kong. All of these terminals would have to be modified to accept payment from contactless debit, credit and prepaid cards from Visa Inc. or MasterCard Worldwide. "The cost of retrofitting would be enormous," Chambers says. The transit system or its banking partners also would have to update their back-end systems to calculate the variety of fares and discounts that transit operators offer customers who use bankcards. Chambers says he does not believe banks are interested in capturing the "micropayments" that transit fare collection represents.
Authoritative analysis and perspective for every segment of the payments industry
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