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Following is a question by the Hon Andrew Cheng and a reply by the Acting Secretary for Financial Services and the Treasury, Ms Julia Leung, in the Legislative Council today (May 6):
Question:
In recent years, Octopus, a contactless smartcard payment system, is widely used, but incidents of faulty deductions by the system concerned still occur from time to time. In this connection, will the Government inform this Council:
(a) whether it knows the number of Octopus cards and the number of products with Octopus functions in circulation as at the end of March this year, the total amount of deposits involved, and the interest income generated annually by such deposits;
(b) whether it knows the number of reports of faulty deductions last year and, among them, the respective numbers of cases involving the transport and retailing sectors; the causes for the faulty deductions, as well as the number of such cases involving system failures; and
(c) given the growing popularity of Octopus, what measures the Government has to regulate the system to ensure that incidents of faulty deductions due to system failures have been minimised; and apart from the Code of Practice for Multi-Purpose Stored Value Card Operation drawn up by the Hong Kong Monetary Authority, whether the Government will consider adopting further measures to regulate the system?
Reply:
President,
The Government's reply to the question is as follows -
(a) According to the information provided by Octopus Holdings Limited (OCL), as at end March 2009, there were more than 19 million Octopus Cards and products with Octopus function in circulation. Of these, more than 80% were on-loan Octopus Cards, while the rest were sold products with Octopus function.
The HK$50 deposit for the on-loan Octopus Card is refundable. When cardholders return their Octopus Cards, OCL will refund the deposit to them after deducting the relevant administrative charge, if any, in accordance with the established procedure.
As at end 2008, the total Octopus Card deposits held by OCL amounted to HK$682 million. OCL does not have separate information on the amount of interest income derived from the Octopus Card deposits alone.
(b) During the period from April 1, 2008 to March 31, 2009, the Hong Kong Monetary Authority (HKMA) received only one customer complaint against OCL through referral by the 1823 Call Centre of the Government. The case concerned a dispute over the amount deducted by a ticketing machine of Mass Transit Railway.
According to the information provided by OCL, during the abovementioned period, OCL received and handled 681 complaint cases relating to wrong charges by Octopus, of which 182 were transport-related and the remaining 499 cases were non-transport related. The wrong charges mainly arose from transactions not properly executed by service providers or cardholders during the transaction process, e.g. the contact time of the Octopus Card with the card reader was too short, or the Octopus payment instructions were not followed properly. According to OCL, all of the affected cardholders have been refunded.
(c) Regarding the monitoring of OCL's daily operations, including the safety and stability of the Octopus system, the HKMA adopts the same supervisory approach as that applied to other authorised institutions, including on-site examinations, off-site reviews, prudential meetings and co-operation with external auditors. OCL is also required to provide the HKMA with statistical information in relation to the usage of Octopus Cards on a regular basis.
In addition to the regulatory requirements under the Banking Ordinance, OCL is required to comply with the Code of Practice for Multi-Purpose Stored Value Card Operation (the Code). The Code requires OCL to put in place appropriate management control measures and procedures to ensure the safety and efficiency of the Octopus system. The HKMA will continue to monitor OCL's compliance with the Code.
The HKMA pays a great deal of attention to the safety and soundness of the Octopus system having regard to its widespread use for retail payment. Following the failed EPS add-value incident in 2007, the HKMA has appointed an Advisor pursuant to the Banking Ordinance to advise OCL on its affairs with a view to strengthening OCL's risk management and internal control over the operation of the Octopus system, as well as enhancing the protection of consumer interests, such as by promoting cardholders' awareness of their rights and responsibilities and increasing the availability of facilities for cardholders to check their transaction records. The HKMA has been monitoring the progress and considered that OCL has appropriately implemented the relevant recommendations. The HKMA considers that the current regulation of OCL is adequate and has no plan to further regulate OCL at this stage. However, the HKMA will continue to monitor developments and take appropriate follow-up actions if necessary.
In regulating transport services, the Government requires the major transport organisations to put in place robust control and auditing mechanisms so as to maintain a reliable payment collection system. The Government will, when necessary, request the relevant transport organisations to implement improvement measures.
Ends/Wednesday, May 6, 2009
Issued at HKT 13:31
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