Will HK underperform t

Hong Kong is paying the price for being a strong financial hub. Its rigid legacy system of banks, credit cards, and Octopus stored value leaves little scope for mobile payment innovation. Luo Weiteng wonders if HK will botch the data economy of consumer t

Data to this century will be what oil was to the last one: a driver of growth and change. Smartphones and the internet have made data abundant, ubiquitous, and far more valuable. This abundance of data gives rise to a new economy that will reshape our future.

Amid talk of Hong Kong’s edge as a digital data exchange for the Belt and Road economies, payment technology is where Asia’s financial hub could lead, said Emil Chan, chief operating officer at Hong Kong-based mobile commerce payment platform CamClaim. Chan believes there is a bigger story beyond the worldwide payment turf war. There is much more than payment transactions at stake.

Digital payments enable data economy

Digital payment, Chan pointed out, lays the foundation for a wealth of innovation. It is the building block for crowd-funding, peer-to-peer lending, online insurance, initial coin offerings and other promising financial technologies.

What really matters is the big data behind transactions — the powerful consumer data value that underpins the emerging data economy. “This calls for Hong Kong to urgently adopt digital payments in a proactive manner,” he added.

The Chinese mainland’s twin pillars of digital payment, Alipay (Alibaba) and WeChat Pay (Tencent), command 94 percent of the mainland market. They are extending their digital payment pipelines for the 130 million big-spending mainland outbound holiday travelers in 2017. Hong Kong has the bulk of this traffic, making it the natural first stop to “localize” mainland mobile payment apps.

New SVF licenses

The Hong Kong Monetary Authority granted stored value facility (SVF) licenses to 14 digital payment operators in 2016. Alipay and WeChat Pay rushed to advertise and promote their Hong Kong-dollar versions, hoping also to convert local residents already well served by the incumbent Octopus card on public transport, 7-Eleven, Circle-K, Mannings, etc.

Alipay and WeChat Pay have aggressively signed on convenience stores, cosmetic boutiques and other retailers which mainland tourists frequent. They want to include street vendors and taxi drivers too. Mobile payments are ubiquitous at every level of retail transaction on the mainland.

However, the “Cash is King” attitude prevails at wet markets, dai pai dong (cooked-food stalls) and taxis in Hong Kong. That frustrates the cashless payment champions. Whether Alipay and WeChat Pay can replicate their mainland success in Hong Kong for local consumers remains uncertain.

Fintech innovation overdue

“Revamping the city’s traditional financial industry is long overdue. The local retail payment system has remained unchanged since the Octopus card was introduced 20 years ago,” said Witman Hung Wai-man, managing director of Qianhai International Liaison Services Ltd and president of the Hong Kong Internet Professionals Association.

The Octopus card has dominated the city’s digital payment market for two decades. Hailed as the poster child of innovative consumer payment technology in Hong Kong, the card is used by 99 percent of local consumers and commuters. More than 34.8 million Octopus cards are in circulation for a city of 7 million. There is little unfulfilled consumer need in Hong Kong to support a swarm of new digital payment providers. The new players must find compelling niches to survive, if they do not already have a captive audience of mainland users shopping in Hong Kong, said Hung.

Finding a niche

TNG — a Hong Kong-based digital wallet operator founded in 2013 — finally gained a foothold by offering global money transfers, foreign-exchange transactions and utility bill payments, after several failed partnerships with local merchants and public transportation operators.

The company branded itself as “Hong Kong people’s e-wallet”. Foreign domestic helpers and unbanked individuals in developing countries use TNG Wallet.

Statistics show that some 14.9 million Octopus card and 1.7 million credit card transactions are made on a single day in Hong Kong.

But that does not deter international payment platform operators joining the new digital payment battleground. “Companies crowd into the territory in the belief