War of digital payment platforms in HK
FOR years, China’s twin pillars of digital payment – billionaire Jack Ma Yun’s Alipay and Tencent’s WeChat Pay – have been branching out worldwide to chase the more than 130 million big-spending mainland holidaymakers who have become a common sight across the globe, including Hong Kong.
As the two payment giants raise the stake in their battle for bigger overseas market shares, Hong Kong has naturally become the “first stop” to localise their payment apps, which secure a combined 94 percent overseas mobile payment market share of the world’s second-largest economy.
Having been granted the so-called stored-value facilities licences from the Hong Kong Monetary Authority with another 14 digital payment operators in 2016, Alipay and WeChat Pay rushed to roll out their maiden versions of the payment-by-smartphone app in a local currency in Hong Kong.
Next, the pair of deep-pocketed payment behemoths ratcheted up their expansion plans with a long list of headline-making campaigns and promotions to scramble for use by mainland tourists as well as local consumers.
Having already conquered convenience stores, cosmetic shops and many other brand-name brick-andmortar stores, they are now making inroads into the traditional street markets, breaking the Octopus card’s decades-long dominance of MTR ticket purchases, and pushing the payment services to the city’s notoriously stubborn taxi drivers who used to be firm believers that cash is king.
Despite all the hype, whether Alipay and WeChat Pay can replicate their glowing success on the Chinese mainland in Hong Kong remains far from certain.
“Just like revamp and update are long overdue in many aspects of the city’s traditional financial industry, the retail payment system in Hong Kong has remained almost unchanged since the Octopus card was introduced some 20 years ago,” said Witman Hung Wai-man, managing director of Qianhai International Liaison Services Ltd and president of Hong Kong Internet Professional Association.
The digital payment market in the territory has long been dominated by the Octopus card. Hailed as the poster child of how innovative Hong Kong used to be compared with its global counterparts, the Octopus card is ubiq- uitous in almost every corner of Hong Kong people’s daily lives, so much so that a staggering 99 percent of local consumers and commuters are seamlessly covered by more than 33 million Octopus cards in circulation.
“The story here is not so much with the cutting-edge technologies that pioneering payment platforms like Alipay and WeChat Pay devise on the front end,” said Emil Chan, chief operations officer of CamClaim Ltd, a Hong Kong-based mobile commerce payment platform. “What matters is an outdated retail payment system at the bottom that fails to allow for immediate or close-to-immediate clearing of transactions, and real-time interbank fund transfer, leaving banks and SVF operators in Asia’s financial centre largely disconnected.”
“This may explain why it would take a whole two days after the transac- tion for the money transferred from the city’s digital payment platforms to eventually show up in local bank accounts,” he added.
In a sign of its determination to recover some “lost ground”, the city’s de facto central bank made the much-awaited move to launch a real-time retail payment system in September last year.
The service, officially called Faster Payment System, or FPS, enables instant or near-instant retail payments, settlement and fund transfers between banks and non-banks.
HKMA Chief Executive Norman Chan Tak-Lam believed the system should be the “world-leading” one as it goes the extra mile to connect the city’s licensed third-party payment service providers together. Such connectivity could barely be seen between Alipay and WeChat Pay on the Chinese mainland, at least for the time being.
“The system itself is better than nothing, but far from enough, as early movers like the Chinese mainland, Singapore and the European Union have already rolled out the likes of FPS a couple of years ago,” Chan said. “When we cheer for the FPS finally getting off the ground in Hong Kong, the next big things blockchain technology, for instance are well underway. We are always one step behind.”
TNG, a Hong Kong-based digital wallet operator founded in 2013, finally gained a firm foothold by offering global money transfers, foreign-exchange transactions and bill payments, after a bout of failed partnerships with local merchants and public transportation operators.
The company polished its brand as “Hongkongers’e-wallet”. But it turns out to be the city’s foreign domestic helpers, and underbanked or unbanked individuals in developing countries without access to banking services, who shore up its business at home and abroad.
Despite a tough market where 14 million Octopus card and 1.7 million credit card transactions are made on a single day, major digital payment operators worldwide are losing no time to muscle in on this Asian financial centre, making the city a red-hot payment battleground.
“With so many market players joining the fray/vying for a share, the major issue facing local consumers is they are bombarded with too many choices,” Chan said.
To bolster the city’s ambition of becoming a world-class smart city over the next five years, the SAR government unveiled a smart city blueprint in December last year.
However, the hot-button issue of payment systems is listed under the domain of “Smart Living”, rather than “Smart Economy”.
“This may indicate that the concept of digital payment remains being viewed in a narrow perspective,” Chan said.
“Basically, I don’t think Hong Kong could make much difference in the business-to-customer payment market. Whether Hong Kong should bother to develop its own payment system is also a question open for discussion,” Hung said. “But what’s going on in the city’s nascent digital payment market just reflects some deeply-rooted problems, which reminds me of the tough and bumpy ride that sharing economy is in for in the territory.”