EZ-LINK AND NETS E-PAYMENT

Background:

The e–payments landscape in Singapore was previously dominated by two major card issuers with non–interoperable cards. The Infocomm Development Authority launched an initiative to develop an innovative standard that would provide an interoperable platform in order to boost local micropayments and open up e–payment services for consumers. The result was a pioneering ISO standard – the Contactless e-Purse Application Standard (CEPAS). This open standard, with unique security and high performance features, enabled multiple payment applications offered by different issuers, to be on a single smart card.

Challenges:

When consumers or business customers use their cards to make purchases, two processes are set in motion. First, there is a data or information process and secondly, there is a payment or financial settlement process. The data process is empowering, yielding valuable market information and the opportunity to monetize it. The payments process can be enriching, although this depends on how the profits are distributed along the value chain and the positioning and business practices of the stakeholders involved.

As card usage grows throughout the region, the volume of data processing is driving the trend towards specialist payment processors. However, there are new challenges arising as this ecosystem develops such as:

• Challenges and trade–offs in the development and deployment of this platfor
• Orchestrating the efforts of multiple stakeholders and balancing various stakeholders' legitimate interests.
•   Incentivizing investment in supporting infrastructure and complementary innovations
• Promoting the adoption and diffusion of the cards by consumers and merchants

               

Stakeholders and their motivations/incentives:

There were various stakeholders affected by the CEPAS alliance including consumers, card issuers, companies using e-payment systems, and the Singapore government. The card issuers preferred the new e-payment system because it might prove to be cost effective on long run. Moreover, the objective here was to move away towards a common environment i.e. using single card across all systems. This change has potential to increase revenues by driving down the costs.

Innovations:

More and more markets are adopting contact-less technology and Consumers and retailers have experienced the benefits in speed and convenience as well as reliability of contact-less devices. Contact-less cards have proven their advantages in numerous implementations, especially in the transport / ticketing and payment markets.

Motivation:

Developments in Singapore’s payments ecosystem are the outcome of strategic government planning based upon commercial principles. The government’s Infocomm Development Agency (iDA) has been promoting innovation in payment card technology and services with the introduction of contact-less payments using mobile phones, based upon near-field communications technology (NFC). The iDA has also adopted a policy requiring the full interoperability of the NFC networks that have been trialled since the latter part of 2008. This means that compliant cards can be used in either system or across other systems, thereby ensuring a competitive market for the card industry. The iDA’s approach, put in place in January 2008 with the establishment of an NFC Roundtable, involving the banks, card schemes, telecoms operators and others, was supported by the findings of a report that stated that a system of fully interoperable NFC networks would create a market eight times larger than non-interoperable networks. The iDA agreed to act as project leader to set up a Trusted Third Party (TTP) to provide management and service delivery.

Key Risks:

There were several risks to the CEPAS initiative, like the readiness of the consumers to accept the change which can be overcome by marketing it on a large scale and letting them all know about the benefits gained after the switch. Another risk I believe can be the extensive terminalisation and more importantly, a common terminal network across all card managers which can be mitigated by developing terminals at places that are most likely to be visited by card holders.