Smart Card Union secures EasyCard deal

A consortium led by Cathay United Bank (國泰世華銀行) yesterday outbid another consortium to secure the right to issue the multi-purpose MRT EasyCard/credit card for three years.

The Smart Card Union (智慧卡聯盟) -- formed by Cathay United, Chinatrust Commercial Bank (中國信託), Taishin International Bank (台新銀行) and Taipei Fubon Bank (台北富邦銀行) -- won the bid by offering NT$412.5 million in royalties, a mere NT$2.5 million more than a bid led by rival Union Bank of Taiwan (聯邦銀行) and Far Eastern International Bank (遠東商銀).

All four banks in the successful consortium are shareholders of Taipei Smart Card Corp (台北智慧卡票證公司), EasyCard's distributor.

EasyCard, which allows users to board buses, ride the MRT and park in public parking stations in the Taipei area, currently has over 5 million cards in circulation.

In view of the growing popularity of EasyCard, the bidding consortiums hoped the new card would provide more business growth amid keen competition.

The Smart Card Union expects to issue more than 2 million multi-purpose cards, which combine credit, e-wallet and transport pass features, over the next three years, the group said in a statement.

The banks will share royalties jointly but pay for rebates individually depending on the number of cards issued, the statement said.

The partners also have individual promotions in the works for the co-branded card bearing their individual names, it said.

"We hope to start issuing cards by the end of this year," said Joseph Jao (饒世湛), a Cathay United senior executive vice president.

The group is continuing negotiations with Visa International and MasterCard International, Jao said, adding that deals with these groups may not be exclusive.

The union reportedly plans to build an alliance across seven counties in Taiwan's south to boost the number of cards to more than 10 million.

But the successful bid does not necessarily mean lucrative business, given the high issuance costs compared to conventional co-branded credit cards, which attract higher royalties and rebates.

"Anyone who wins the business will lose money," Union Bank marketing manager Chen Mei-ji (陳明智) said, adding that the cost of each card could amount to NT$2,000, compared with NT$1,000 for a conventional co-branded card.

But the group can expand its market share and foster cardholder loyalty in light of frequent use of the EasyCard, he said.

Union Bank had hoped to make itself one of the nation's top three card issuers by winning the bid.

Chinatrust led the nation's credit-card market with 4.34 million cards in circulation as of January, followed by Taishin's 4.69 million, Cathay United's 3.53 million, Union Bank's 2.88 million and E.Sun Bank's (玉山銀行) 2.43 million, according to statistics from the Bureau of Monetary Affairs.