The data economy?
that if they can survive in Hong Kong’s stringent regulatory environment, they can succeed in any part of the world,” Hung reckoned.
Status-quo mentality
Dismissing the idea that Hong Kong is lagging behind technologically, Hung believes the major hurdle is its mentality, which restrains the financial hub from truly recognizing the huge potential of digital payment technology. “Hong Kong may be late but we have not yet missed the boat. The local payment market, ready for a big change, is crying out for leadership from its policymakers and incumbent payment operators,” he added.
“What’s going on in Hong Kong’s nascent digital payment market reminds me of the bumpy ride that ride-hailing service Uber and home-sharing operator Airbnb suffered,” said Hung. “Cash-rich traditional financial institutions just lack the incentives for disruptive technologies, while HKMA — the city’s banking regulator — is slow off the blocks in opening the door for a potential game-changer.”
HKMA promises innovation
The HKMA — the city’s de facto central bank — announced a forthcoming real-time retail payment system by September this year. The service, called Faster Payment System (FPS), will enable instant or near-instant retail payments, settlement, and fund transfers between banks and non-banking financial facilitators.
HKMA Chief Executive Norman Chan Tak-lam believed the FPS would be “world-leading” and link the city’s licensed third-party payment platform providers. Interoperability between payment platforms like Alipay and WeChat Pay does not yet exist on the mainland, despite a similar FPS having already run for years.
“Users and merchants are often on different payment platforms,” said Gary Ng, risk assurance partner at PricewaterhouseCoopers Hong Kong. “FPS will integrate all banks and SVF operators, allowing account holders to transfer money between different platforms on an almost real-time basis,” Ng noted, adding that he believed it will come with a QR code standard, for wider use of mobile retail payments and allow greater convenience for customers and merchants.
What about blockchain?
Chan is less enthusiastic. “The SVF system is far from enough. Early movers like the Chinese mainland, Singapore and the European Union have already rolled out FPS years ago. While FPS is coming to Hong Kong, the next big thing, blockchain technology, is well underway. We are always one step behind.”
“Though the Octopus card is often cited as the culprit for Hong Kong’s late-mover disadvantages in the digital payment race, the root of the problem is much more fundamental,” said Emil Chan. “The story is not so much the cutting-edge technologies that payment platforms like Alipay and WeChat Pay devise on the front end. What matters is an outdated retail payment infrastructure that fails to allow immediate or near-immediate clearing of transactions, and realtime interbank fund transfers, leaving banks and SVF operators disconnected. It takes two days for money
Market size of QR code payment grows 3.6 times in 2016 on Chinese mainland
High penetration of mobile payment on the Chinese mainland, 2017