Spa prepayment protection scheme goes digital after slow adoption

The revamp of EZ-Link's Trust programme four years after its launch follows slow adoption of the scheme and the beauty industry being thrust back into the spotlight after being named the top source of consumer complaints in 2018. ST PHOTO: JASMINE CHOONG

SINGAPORE - A programme that protects consumers' spa package prepayments is going digital in an effort to woo more businesses and consumers to come on board.

EZ-Link's Trust programme, an initiative by the Consumers Association of Singapore (Case), was first launched in 2015 after a spate of sudden business closures that left customers out of pocket.

Its revamp four years later follows slow adoption of the scheme and the beauty industry being thrust back into the spotlight after being named the top source of consumer complaints last year (2018).

Under Trust, participating beauty firms do not hold on to the lump sum payments that customers make for packages, which are popular for the significant savings they offer.

Instead, the amount goes into a fund managed by EZ-Link, and is paid to the operator each time a session is redeemed.

In the event that the business goes bust, the EZ-Link will return the unused funds to the customer.

Since its launch in 2015, four operators have gone bust, resulting in several thousand dollars being refunded to customers, according to EZ-Link.

Customers had previously been issued a Trust card, used to check details such as account balance for all packages purchased from participating merchants.

The card will now be replaced by the Trust app, which was launched on Tuesday (March 26), and is available for immediate download on Android devices and by mid-April for Apple users.

An app and web portal to help merchants cut through some of the hassle and allow them to display their catalogues and promotions to consumers were also rolled out at an event at the Parkroyal on Pickering hotel.

After four years, the programme still appears to have had limited success in convincing businesses to sign up.

Under the CaseTrust scheme for the industry, accredited businesses that collect prepayments are required to either insure its customers against sudden closures or sign up for Trust.

While there are more than 300 accredited businesses currently listed as providing such prepayment protection, only about 50 are currently using Trust.

The problem? Clunky hardware and convincing merchants to park their sales with Trust rather than using the money to finance their cashflow, according to EZ-Link's chief executive Nicholas Lee.

Speaking to media at the launch event, Mr Lee acknowledged that there have been challenges in getting businesses on board, but he said that the revamped digital platform aims to address the "logistical stumbling blocks" and incentives for spa and wellness operators.

"Traditionally for these businesses, prepayments are about using the money to finance operations and expenses. But that poses a lot of risk to consumers," he said.

The benefit of using Trust to operators is that they can lock customers in with packages while providing assurance that their money will be returned in the event that the business fails, he added.

While consumers do not need to pay extra to use Trust, merchants pay a fee to EZ-Link per package sold. Mr Lee stressed that this fee is competitive with insurance rates and unlike insurance schemes, no upfront premiums are required.

To motivate more merchants to come on board, the wait time for businesses to receive payment for sessions has been reduced from several days to the next day, through the interbank fund transfer system Fast.

And with the revamp, cumbersome terminals and cards have been replaced with a tablet that provides businesses with sales and management systems, among other digital features.

Expansion of the programme to other problematic industries, such as renovation, bridal and travel are also on the cards, said Mr Lee.

"But the focus is on getting this running first... if we don't get this successful, there's no point talking about the rest," he said.

According to statistics released by Case earlier this month (March), the beauty industry saw a 31 per cent increase in complaints last year compared to 2017.

There were 1,829 complaints lodged against the industry, nearly half of which were related to the loss of prepayments due to abrupt business closures and aggressive sales tactics.

Global Beauty, which joined Trust in 2016, now has 10 outlets on board under the Bella Marie France and Svenson brands.

Its chief executive Amy Quek said that while cashflow took a hit in the beginning, the greater confidence that the safeguard gave customers had has helped to keep a steady stream of regulars, most of which pay through Trust.

The Ultimate Group decided to bring three more spas on board the revamped platform, in addition to one that joined in 2015, as the new interface is easier for staff to use, said assistant general manager Denise Lim.

Switching from insurance has also resulted in "a lot of cost savings" as premiums, which can be over 2 per cent, may mean having to fork out thousands upfront, she added.

But staff training is needed to explain the changes, as some customers have been hesitant to hand over NRIC details, required by EZ-Link under Monetary Authority of Singapore regulations.

"With the app customers can register (their details) themselves, which is better," said Ms Lim.

Join ST's WhatsApp Channel and get the latest news and must-reads.