Tomorrow will be the first anniversary of the granting of the first batch of stored value facility (SVF) licences by the HKMA. I would like to take this opportunity to recap the development of the electronic payment industry in Hong Kong. Let me begin by telling you a little story of my own. Ever since the granting of SVF licences, I have been trying to use my mobile e-wallet P2P function to share the bill during social gathering. Initially, most of my friends found it unnecessary to switch from cash to e-wallet. However, those who were more receptive to new ideas asked me to teach them how to use e-wallets so that they too could keep up with the latest trends. These days, those who insist on paying cash have become the minority!
Does this story sound familiar to you? Perhaps quite a number of you have had similar experience in the past year where you had no idea about mobile payment at the begining and had felt uneasy about using it until you were introduced to it by a friend or relative, and soon you began to enjoy the convenience brought about by it and even became a user. On the other hand, those who frequently travel to the Mainland are amazed at the rapid development of and the convenience brought about by mobile payment on the Mainland which is leading the global trend in mobile payment.
People in Hong Kong are not at all unfamiliar with electronic payment methods. Credit card payment, online purchases and online fund transfers have long become parts of our daily life. Octopus card can even be seen as the forerunner of e-wallet. It has gradually developed from a stored-value card for payment of transportation fares into a tool for small-value payments with a wide range of applications. In fact, Hong Kong already has a well-developed electronic payment ecosystem since long ago. A rough estimate shows that the total transaction amount of electronic payment (including credit cards and Octopus cards) represents more than 60% of total private consumption expenditure. As Hong Kong people have already developed a habit of making payment with credit cards and Octopus cards and also like their bonus point and rebate schemes, mobile payment operators face keen competition when entering the payment market in Hong Kong. They need to put in extra efforts in enticing consumers to adopt new payment modes.
Objectively speaking, each electronic payment method has its own merits. For instance, credit cards can settle transactions that are relatively large in value, while Octopus cards, capable of processing payment most speedily, are great for public transport and other applications involving high frequency usage. On the other hand, new means of mobile payment that have become increasingly popular in recent years can integrate with different apps to allow convenient online payment alongside other additional features. While there are a wide range of options available new and old, no single technology is perfect in providing the fastest and most convenient payment solution for all purposes. The most important thing is that consumers are afforded different payment options and able to enjoy the various benefits brought about by these options.
By issuing 13 SVF licences in 2016, the HKMA aims to leverage on market forces to promote competition and innovation so as to provide the public with different payment choices. Over the past year, we have seen different operators putting on stream a myriad of new payment services, including electronic coupons, family group e-wallet management, online shopping, remittance, insurance and QR code payment, making our local electronic payment services increasingly diverse. I am sure the pace of these developments will accelerate in the future and our local e-wallet operators may even be able to expand outside of Hong Kong.
Indeed, Hong Kong compares well with any places in the world in terms of electronic payment technology, efficiency and diversity. Yet, Hong Kong has been perceived by some for lagging behind in the development of electronic payment, primarily because many small businesses and the taxi industry still accept cash only. The perceived high costs for installing electronic payment card readers, connecting to network, paying transaction levies, etc., may be one of the factors behind this phenomenon. However, with the introduction of new e-wallet operators, the new technologies and a more competitive environment have already reduced the costs substantially.
Recently, we noted some encouraging developments as more and more merchants have come to realise that besides speeding up payment process, electronic payments can reduce both the costs and risks associated with handling cash. These merchants can also better promote their businesses by working with other mobile phone apps, allowing them to reap multiple benefits at the same time.
When I was on a taxi last week, I noticed a QR code on the back of the driver’s seat for taxi fare payment by e-wallet. The driver told me enthusiastically that his taxi company had also installed credit card readers six months ago, and would install other devices for electronic payment in future, offering more options and convenience to drivers and passengers alike. Beaming with delight and even a hint of pride, I could see that he was indeed very proud to be able to provide a new generation of taxi service. I sincerely hope that more small businesses and taxis will get on the electronic payment bandwagon, giving themselves more convenience while affording users more payment choices to achieve a win-win situation!
Senior Executive Director
Hong Kong Monetary Authority
24 August 2017