Building a Diversified, Inclusive and Convenient Payment Ecosystem


13 Nov 2017

Building a Diversified, Inclusive and Convenient Payment Ecosystem


I came across an article recently saying that in the past, Mainlanders were able to differentiate Hong Kong visitors by their Hong Kong-accented Mandarin.  Nowadays, Mainlanders can tell that a person must come from Hong Kong if he/she is paying with cash rather than mobile wallet.  Many Hongkongers have witnessed the ubiquity of mobile payment on the Mainland.  Some even said that they had come across beggars using QR code on the Mainland, and therefore consider that the progress towards a “cashless” society in Hong Kong is far behind the Mainland.  Is this really the case?

The electronic payment development in different economies varies. Their models and paces depend on various factors, such as their own conditions and the needs of their citizens.  Electronic payment tools include credit cards, debit cards, stored value cards, mobile payment, etc.  The leapfrog development of mobile payment on the Mainland is something unique and rare.  Thanks to technological innovations, there have been continuous enhancements to mobile phone features, making it possible for mobile phones to become a new payment tool.  The availability of smart phones at affordable prices has also allowed Mainland users to opt for payment with mobile phones directly, bypassing conventional payment tools such as cheques and credit cards which are yet to become popular on the Mainland.  Let’s look at the situation in other developed economies.  Take the example of Sweden, the most “cashless” society in the world, the usage of mobile payment (Swish) by its citizens is about 60%1.  This is lower than the 97% and 80% usage of credit cards and debit cards respectively.  This shows that the “cashless” payment market is still dominated by conventional electronic payment tools.  In Japan, although there is a huge number of credit cards and stored value cards (mainly for transportation) in circulation, due to cultural and other factors, residents in Japan still mainly pay with cash, accounting for 80% of all transactions.

Electronic payment has been widely accepted in Hong Kong with different kinds of popular “non-cash” payment options available in the market over the past two decades or so.  Hong Kong people choose the type of payment tools according to their needs wisely.  They will use credit cards when making large-value payments in order to earn reward points, and Octopus cards when taking public transport or making purchases at convenience stores for speedy payments.  For the recently emerged mobile payment to grow its footprint in Hong Kong’s relatively mature payment ecosystem with consumers accustomed to established payment modes, its development process will definitely be very different from that on the Mainland.

Another contributing factor is convenient cash withdrawal and deposit services as well as safety in using cash.  Hong Kong has a high concentration of automated teller machines (ATMs).  There are more than 3,000 ATMs in Hong Kong.  People can make cash withdrawals or deposits 24 hours a day.  As for the Mainland, the largest denomination of notes is RMB 100.  One would need dozens of notes to make a large value payment of several thousand dollars in cash.  It is just impractical to carry so much cash within a physical wallet.  As a result, Mainland consumers turn to electronic wallets.  Some also think that as the counterfeit rate in Hong Kong is only one counterfeit note in every million notes, which is a very low level in the world, it is relatively safe to use cash.  Therefore, contrary to consumers on the Mainland, there is a lack of incentive for consumers in Hong Kong to use electronic wallets in order to avoid receiving counterfeit notes.

Recently, the term “cashless society” has been trending.  It is of course a good thing to offer convenience to people.  However, if things are taken to extremes, with cash no longer welcome in our daily lives, is it really what people want or is this in the best interests of our society?

Let’s take Sweden as an example again.  In this highly cashless country, thirty percent of citizens surveyed have a negative attitude towards the decline of cash usage.1  The extent of “cashless” in Sweden has reached a state where some banks do not allow cash withdrawals and deposits.  In response, some citizens have started the “Cash Uprising” (Kontantupproret) and fight for the rights of those visitors and senior citizens who do not have access or are not used to electronic payment means.  This series of reactions prompted the Swedish government to consider whether it should enact laws to compel domestic banks to provide cash services last year.
According to a survey quoted recently by a member of the Executive Board of the European Central Bank in his article2, among the 65,000 eurozone residents polled, 80% of their point-of-sale transactions were paid in cash, accounting for about half of the total transaction value.  In fact the demand for cash in the eurozone has increased consistently in the past five years, and its growth rate is even faster than economic growth.  Of this, cash was predominantly used for transactions, rather than savings. 

The experience in Mainland China and elsewhere has provided useful reference for us.  Our view is that while Hong Kong strives to foster the development of a diversified, efficient and secure electronic payment ecosystem, we should also give due regard to the habits and needs of merchants and the general public, accepting both cash and various electronic payment methods.  Only this approach will be truly beneficial to merchants and the public.

One sector in concern is tourism.  Last year, there were some 56 million visitor arrivals, bringing revenues of over HK$290 billion in 2016.  When doing business in Hong Kong, we strive to provide the greatest convenience possible for visitors from around the world.  A diversified and inclusive approach means that visitors can spend in such a manner which is most suitable and convenient for them.  In an extreme case of going cashless – where Hong Kong only accepts local electronic payment methods and even rejects Hong Kong dollar cash – the tens of millions of visitors coming here every year will experience great woes while trying to settle their bills.  Tourism, one of Hong Kong’s pillar industries, will be negatively impacted.  Fortunately businesses in Hong Kong have acted swiftly, with an increasing number of shops accepting various Mainland and overseas payment tools.  From this development, we can see whether or not a payment tool would become popular depends on the dynamic interaction between the stakeholders in a given payment ecosystem.  We now already have different types of payment tools, including mobile payment.  However, to become successful, they must be widely accepted and used by consumers and merchants.  Hong Kong prides itself as a free economy, where it is up to the market to choose appropriate payment tools.  The most important thing is that consumers and businesses do have a choice.  Take the taxi industry as an example.  We have seen the emergence of new payment options made available by various operators and start-ups which wish to venture into this market.  We wish them success so as to provide more choices to the market.

The HKMA is committed to promoting the development of a diversified payment ecosystem.  Since 2016, we have issued 16 stored valued facility (SVF) licences.  Coupled with conventional payment options, Hong Kong boasts a vibrant and inclusive payment ecosystem.  The fact that major e-wallets and payment tools from Hong Kong, the Mainland and overseas have begun to gain popularity here speaks for its inclusivity.

Furthermore, the HKMA is busy developing a Faster Payment System, which provides full connectivity of all types of electronic payments.  The system will be open to all banks and SVF operators to provide round-the-clock, inter-bank, inter-operator, real-time fund transfer services.  A mobile phone number or email address will be all it takes to make person-to-person, person-to-business and business-to-business fund transfers, in either HKD or RMB.  We plan to roll out the system in September 2018, achieving real-time settlement in a retail payment infrastructure. 

Now back to what I have said at the start.  With the increasing integration between Mainland and Hong Kong, some Mainland e-wallets are already being accepted by local merchants.  To facilitate Hong Kong people travelling to the Mainland for business or pleasure, my colleagues and I are working closely with the operators so that Hong Kong’s e-wallets can also be used on the Mainland.  I hope the anecdotes of Hongkongers’ payment habits mentioned at the beginning of this article will soon become just a tiny footnote in the history of Hong Kong’s payment development.


Howard Lee
Senior Executive Director
Hong Kong Monetary Authority

13 November 2017


1. 2016 payment statistics published by the Riksbank:

2. Why Europe Needs Cash:

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Last revision date : 14 November 2017