Cashless Challenge in Hong Kong : How Hong Kong is falling behind?
Hong Kong has been accused of falling behind in transforming to a cashless society. Despite the infrastructure and payment tools availability (i.e. the famous octopus card), network effect is always an important factor for a technology to go viral.
Instead of complaining on Hong Kong falling behind, I challenge myself to go cashless as an experience and advocacy. My rule is simple, which is avoid using any form of cash for one month. To complete this challenge, I need payment and peer-to-peer transfer tools. In this articles, I will introduce payment and p2p transfer tools that are common in Hong Kong but not well-known internationally, evaluate them and share my personal experience on my cashless challenge.
Introduction to Hong Kong digital currency :
Octopus Card: Owned by major transportation companies, it has been the most popular and well-known digital payment in Hong Kong with 28M cards issued. It is widely adopted in most public transportation (except taxi and red minibus) and many merchants.
EPS: Owned 20 banks in Hong Kong, it is electronic payment services provider. The service is available for most of the ATM card holder in Hong Kong.
Neat: it is a mobile current account for the Millennial generation that makes sure you keep on top of your spending budget automatically. Neat is two things:1) a mobile app 2) a prepaid card.
O!ePay: It is a p2p transfer tool and online payment gateway developed by Octopus. The main difference is that O!ePay support transfer-in and transfer-out by a physical Octopus card (not available on IOS)
Tap & Go: Tap & Go is a prepaid mobile payment service for customers. It also provides one-stop payment acceptance service also helps small and medium-sized enterprises (“SMEs”) and online merchants
TNG: It is a e-wallet APP with SVF license. TNG supports both payment and p2p transfer. Apart from that, it also provides coupon management, bill payment and global remittance.
PayMe: It is a p2p transfer tool developed by HSBC. The main difference that user can send invitation plus money via instant messenger like WhatsApp, SMS and Facebook messenger.
On-boarding and top up:
I don’t have all the payments tools but these are commonly available tools in Hong Kong.
In terms of experience, PayMe and TNG are easy to top-up for me because I can get my money instantly without going to any physical location. Auto-top-up Octopus Card is also convenient except the sign up process, while O!ePay experience is not very great as I am a IOS user without an external card reader. As a user, instant top-up is most important to me as I trend to top-up the account when I need to use them. Although topping up Neat is the least convenient, the package of the physical card is impressive. More importantly, since I am putting money in different SVF, a tool to manage my money and spending would be useful, where Neat is the only one with spending tracking function.
After a month of being cashless, the frequent used tools are Octopus Card, ATM Card (EPS), credit card and Apple Pay. The major consideration for choosing payment tool is to minimize my time spent in checking out. Octopus card is the most common for small amount purchase (HKD 10–300), while EPS is common for larger amount like I bought my Nintendo Switch with EPS. There was a day I spent 30 mins or more to look for a restaurant accept digital payment and at the end I withdrew cash in 7–11 via EPS.
The major obstacle I faced is that there are many small merchants especially small restaurants accept cash only. For the merchants who accepted digital payment, Octopus card is the most common and other payment methods are available to chain stores. Since Octopus card is just a swipe with the physical card, it is always my first choice.
P2P transfer experience: the moment of truth on friendship.
I have been telling my friend about this cashless challenge. Even though I have many friends working in startups and FinTech companies, I found out it is very rare to find a friend has been actively using P2P transfer in Hong Kong (if I don’t count my friend from Mainland China who have been using WeChat Pay and AliPay in Mainland China).
When I need to split the bill but my friends have no p2p transfer APP, it is very difficult to convince them to download and finish all the on-boarding upfront. Most of the time I would send them money on PayMe via whatsapp. They have to download PayMe APP and finish all the verification in order to get the money I sent them. The good thing is they don’t need to do it upfront but many are still skeptical on the security aspect because of the clash on the first day of launching. The ability to send money via instant message platform is a very useful functionality to convince/force your friends to onboard. However, the drawback of PayMe is that it doesn’t have any payment function now so that the money couldn’t circulate.
Why merchants are not using?
There are two common reasons people used to explain why merchants are holding back to cashless solution especially small merchants which is avoiding service charge to the payment solution provider and avoiding tax obligation. Let me try to drill down on the charge of different payment method.
*some hardware rental costs are ignored and some may vary depends on banks and partners
The major reasons for merchants to accept digital payment is to save cost on cash management and retain customers who don’t have cash. There is obviously a trade-off between the potential customer lost and service charge to payment solution provide, which also affected by the sales volume and margin of each merchants.
What can be done to catch up?
Mainland China is leading in digital payment. You can easily do everything cashlessly even buying food on the street and easily see people in their late 50s actively using WeChat pay and AliPay. How can Hong Kong improve and learn from Mainland China?
Seamless top-up experience: Preparing to Mainland China, once users link their bank account with AliPay or WeChat, money can be directly debited from the bank. Right now banks in Hong Kong only provides online top up to the above mentioned payment platform as a “bill payment”.
It is because Hong Kong digital cash platforms are positioned as “Stored Value Facilities”. In order to achieve the direct debit and provide the seamless experience, Hong Kong should work on its technology infrastructure and regulatory issues related.
Cash Incentive program: providing cash incentive for inviting friends is an important factor to boost the network effect. There are some platforms have these incentive program in Hong Kong like Neat, PayMe and O!ePay etc. For merchant side, there can be cash reward or charge discount especially for the small merchants
Loyalty program with partner merchants: payment platforms can offer special offer with their partner merchants to retain customers to use their platform. It is both beneficial to the merchants and the platform
For Hong Kong to catch up with the cashless trend, it is a chicken and egg dilemma at the end of the day. It is very important that we start to use digital cash. By the time merchants realize the cost of losing customer outweigh the charge for digital payment, Hong Kong can truly catch up on the cashless development.