CEPAS (prep)

Previously, before 2009, two major card issuers held 95% of Singapore’s micropayments market. The Land Transport Authority (LTA) and the Network for Electronic Transfers Singapore (NETS).

1)    LTA

Consisted of the EZ-Link fare card, which monopolized the public transit market including rail/mass rapid transit, ticketing, bus and taxi fare collection.

2)    NETS

CashCard which held rights to the electronic road pricing system and dominated retail payments as well as Singapore’s private car park schemes. This consisted of 60% market share.

Integration of both systems was needed to provide convenience for e-payment consumers, but there were many obstacles involved.

·       Lacked interoperability-they could not exchange data which limited growth

·       Different commercial interest of the parties involved

·       Cost infrastructure and established network of card and card readers were already in place

For the purpose of a large-scale implementation, merging these systems was imperative. Commonality has to be established within the commercial, operational and technical aspects.

Background:

In 1985, NETS was part of a government initiative to drive productivity, it was set up by a group of local banks. This initiated Singapore’s first cashless payment platform through the nationwide Electronic Funds Transfer at Point of Sale Network (EFTPOS)

In 1987, LTA’s single function magnetic fare card launched.

In 1996, Nets launched the CashCard; e-purse scheme using smart cards-used primarily for payment of parking fees and ERP toll charges.

In 1998, it cost Singapore $656 million to support local currency in circulation and the projected cost of handling cash was expected to increase to 1 billion in 2006

In 2002, replaced its magnetic fare card with a contactless multipurpose smart card (part of the Enhanced integrated fare system (EIFS))

Because of the EZ-link fare card----NETS was no longer the sole provider of widely accepted stored value facilities approved by the Monetary Authority of Singapore (MAS)

In 2003, Nets annual collection of ERP charges totaled $80 million; CashCard payments at car parks totaled $85 million. There were 5.5 million EZ-link cards in active circulation vs 4.5 million NETS CashCards

Singapore’s local market card growth was at 5% and 60% of transactions in Singapore were estimated to be cash-based.

(The two payment modes collected; EZ Link –$974 million and CashCard $271 million)

There was substantial competition in the retail sector from the credit and debit card.

Through its first-mover advantage as being very significant in the merchant acquisition through the EFTPOS network and having the largest terminal base island-wide, its CashCard showed strong growth in retail transaction volume. Within a span of two years the CashCard transactions grew from 102 million to 135 million.

In 2004, Nets reward loyalty program launched-to complement its core e-payments business

Singapore needed one platform to combine these two methods and make it more efficient for the business and less costly for the consumers. To do this the Infocomm Development Authority developed the Contactless e-Purse Application Standard (CEPAS).

The stakeholders involved were the consumers, because it would save them money and the convenience. The government because it would decrease the cost of cash handling and the businesses that benefited from electronic payment systems. EZ link and NETS would benefit from one infrastructure that would help reduce cost.

Along with security and integrity requirements, CEPAs had to meet the high-performance requirements of Singapore’s transit system. This included;

·       Atomicity – Complete updates or nothing at all

·       Signed Certificate-Successful verification of Signed Certificate at the Card Manager’s host proved integrity and authenticity of transaction

·       AutoLoad – If the card was linked to a bank account or credit card it would provide balance by a specified amount when the debit amount was insufficient

·       Partial Refund – Limited to the most recent amount debited, this was useful for retail and bus fare transactions that required ‘at start, deduct maximum, upon end, and refund unused amount’.

·       Cumulative Debit (or Slicing) – To reduce transaction processing overheads, debit operations for one card were accumulated into a final amount

Consumer’s motivation for embracing the functionality of the CEPAS system was the benefit of using a single card for its array of transactions, which included the bus, rail and taxi payment and retail purchases. Although, consumers were still moving at a gradual pace to change their method of paying cash for the taxi fares as noted by Mastercard’s survey. For the industry, contactless payments provided the convenience for customers, which benefited merchants. There was a decrease in queuing time that resulted in higher sales and transaction volumes due to the faster payment efficiency provided by contactless smart cards. Overall there’s alot to gain from the implementation of CEPAS. Risks are minimal compared to the benefits.