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SCMP Reporter

The debate over the recent increase in Easy Pay System (EPS) charges took a political twist when the Democratic Party said at the weekend it would propose a private member's bill on fair competition at the first sitting of the new legislature, after a new Legco is elected in September.

The recent increase in EPS charges from a HK$2 flat fee per transaction to as much as 0.75 per cent of the purchase amount has sparked strong reactions from the Consumer Council, trade organisations and political parties.

The move by the Electronic Payment Services Company (Epsco) has affected more than 300 merchants in Hong Kong.

'There is no anti-trust law in Hong Kong. We feel that there should be more competition in the markets,' said Fred Li Wah-ming, spokesman for the Democratic Party on consumer affairs.

The Consumer Council recommended in a report last week that the 35 member banks of the consortium negotiate individual charges with merchants, rather than negotiate as a group which they were doing now.

The council also pressed for more transparency and accountability in the development and operation of network payment systems.

'Epsco is using its market power to artificially inflate the fees that increase costs of merchants, and this increase may eventually be passed down to consumers on the products,' Mr Li said.

'Member banks should compete within the same network like in Australia. Hong Kong is a small economy in terms of merchants. In foreign countries it is typical to have more than one network like the EPS but the number of networks is not the focus, it's what is in the network. That will set the optimal charge levels and give merchants more choices and packages,' said Professor Tsang Shu-ki, chief of the Consumer Council's competition policy committee.

Epsco defended the increase, saying it was recruiting merchants for banks.

'The operating costs will be higher for banks if they are to compete by recruiting their own merchants,' said Epsco spokesman Steve Cheng.

He said there was no guarantee consumers would benefit.

Regarding how Epsco calculated the increase, Mr Cheng said it was a 'commercial decision' and refused to give details.

He said Epsco was operating like any other company and, like the others, it had disclosed as much as it could.

The Consumer Council received complaints from four trade groups after the price rise in June: the Chamber of Hong Kong Computer Industry, the Travel Industry Council of Hong Kong, the Hong Kong Jewellers' and Goldsmiths' Association and the Kowloon Pearls, Precious Stones, Gold and Silver Ornaments Merchants' Association.

More than 1,800 computer shops and travel agents have boycotted the EPS payment system since June. Computer shops started another one-month boycott from August 1.

The merchants say that on average, if a transaction is more than HK$260, merchants will have to pay a fee higher than before based on the new commission of 0.75 per cent of the amount.

Trade organisations, too, have been disappointed over Epsco's unwillingness to discuss or negotiate its fee increase.

'They never opened the door to talk to us. We went through Legco to request a meeting, but Epsco refused. We also wrote a letter wanting to discuss the charges but the reply was to take it or leave it,' said Jacky Cheung Yiu-shing, chairman of the Chamber of Hong Kong Computer Industry.

With the arguments over the fee rise continuing, consumers are being inconvenienced while retailers refuse to accept EPS payments.

They are asking consumers to use either credit cards or cash to replace EPS payments. If they insist on using EPS, consumers have to bear the additional charge.

Epsco has refused to budge from its stand and remained firm on their decision.

It argues that the additional costs should not be passed on to consumers as the merchants have an agreement with the company and are not allowed to transfer costs to buyers.

The merchants say they are not breaking the deal. 'Most of the consumers are willing to pay because they know it's not our fault. However, it is inconvenient to many people as many ATMs near computer shops have been running out of cash,' said Mr Cheung, the representative of the computer industry.

Epsco also rejected the accusation it was a monopoly. 'One player doesn't mean there's a monopoly. Consumers can choose other modes of payment such as the Octopus or smart cards,' Mr Cheng said.

The fact that retailers were able to boycott EPS and rely on alternative payment methods was clear evidence of other options and of market forces ensuring competitive pricing within the payments industry.

A survey carried out by the Democratic Party in May found that 93 per cent of users of EPS said they would not pay by EPS if shops passed higher operation fees on to consumers.

'Comparing the debit card with credit cards or smart cards is like comparing watermelons with oranges. The beauty of EPS is it's like cash but with no risk, unlike smart cards. If you lose them, you lose the money,' said Mr Cheung.

Credit card companies charge an average of 2 per cent per transaction.

The merchants who have been affected by the increase of EPS charges and who strongly objected are those with a high turnover of EPS transactions.

According to Mr Cheung, the average transaction in the computer industry is HK$2,000. With the 0.75 per cent fee, merchants will have to pay HK$15 instead of HK$2, which is more than seven times the previous charge.

'We just want dialogue. If merchants and consumers suffer, Epsco will eventually suffer.' said Mr Cheung.

The trade organisations are still pressing for talks on the issue while the Consumer Council has called for a competitive market.



EPS may pay political price