Chinese firms circle as Hong Kongers embrace mobile payments

By Wei Sheng
5 min read

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Local resident Stacy Man believes it is now possible to go a week in her native Hong Kong without using her wallet or cash.

That would have been hard to imagine in the Asian financial hub just a few years ago. A mix of cash, credit cards, and payment smart card Octopus has dominated the city for years. While they remain popular, the situation appears to be changing as mobile payments are increasingly accepted at stores and restaurants, as well as on public transport.

So far the changes in the special administrative region have not been as radical as those on the Chinese mainland, where cash is fast becoming a thing of the past, especially in urban hubs.

Man, a 19-year-old university student, clarified that her choices would be relatively limited if she left her cash and credit cards at home for this imaginary survival challenge.

“If you make every purchase in supermarkets or convenience stores, I think that will be okay,” she said. “But if you want to buy something from the wet market or on the streets, then it may not be a good choice [to use mobile payments].”

Despite the limitations, Hong Kong residents are growing increasingly familiar with this new way to pay. Some 84% of Hongkongers have used mobile payments before, according to a survey from the Hong Kong Internet Registration Corporation Limited last August.

Fierce competition

The competitive landscape not only features not only China’s usual suspects Alibaba and Tencent but also global players such as Google, Apple, and HSBC.

Alibaba’s Alipay and Tencent’s WeChat Pay, which enjoy a combined 93.2% share in the Chinese mobile payment market, both chose Hong Kong as their first port of call for their global expansion.

WeChat Pay has been available in Hong Kong since February 2016 while Alipay entered the market with its AlipayHK localized app in May the year after. Both apps allow Hongkongers to complete transactions by scanning merchant QR codes. AlipayHK claimed in March to have more than 2 million users, and 50,000 retailers have signed up.

However in Hong Kong, it appears that Alipay and WeChat Pay will be unable to enjoy their duopolistic dominance that they have grown accustomed to in the mainland, at least for now.

This is in part due to Google, Apple, and Samsung, which entered the market earlier. The roaring success of Octopus has also contributed. There have been over 35 million cards issued in the market, home to only seven million residents.

People in Hong Kong use Octopus cards to enter a metro station on July 9, 2019. (Image credit: TechNode/Shi Jiayi)

HSBC, the biggest bank in Hong Kong, launched peer-to-peer payments app PayMe in February 2017. Only available for those with Hong Kong phone numbers and bank accounts, it has racked up more than 1.5 million users in the space of two years, according to company data.

The commercial lender announced in February that testing had started on a business version of PayMe. Also reliant on single-use QR codes, the service is available at 15 retailers as part of the trial.

Driving factors

The battle for Hong Kong’s mobile payment market began when authorities granted the first batch of operating licenses in 2016 to five players including AlipayHK and WeChat Pay.

Their issuance helped to reduce uncertainty regarding investments in mobile payment and helped drive the adoption of the technology in the city, Hong Kong-based Deloitte China partner Paul Sin told TechNode.

Sin contends that the entry of HSBC’s PayMe is one of the key driving factors of the technology’s growing adoption.

He also believes that increasing interactions between Hong Kong and China have spurred on growth, adding that mainland service providers like Alipay and WeChat Pay, are de facto payment channels linking the two regions.

Liu Dawei, an e-commerce professor at Hangzhou Dianzi University, told TechNode that the influx of mainland Chinese visitors to Hong Kong is also boosting the use of the payments in the city.

“If Hong Kong retailers don’t provide payment methods such as Alipay and WeChat Pay, then mainland [China] visitors would find it very inconvenient. From the retailers’ points of view, the costs of providing such mobile payment methods are very low, so they are willing to adopt them,” said Liu.

From a user’s perspective, the reason for them to use mobile payment methods is simple: It’s more convenient.

At the RISE tech conference in Hong Kong from July 9 to July 11, TechNode asked nine locals about their experience of using the platforms, and most of them regarded convenience as a primary reason for them to use the new technology.

Adrian Ng, a 29-year-old human resources consultant, said he uses Google Pay, AlipayHK, and PayMe. “It’s very convenient, and it’s very easy. So payments get done in a second,” he said.

“It’s nice not to have to bring around so many cards all the time. And it’s an easy way to track [expenses],” said 25-year-old Lan Lai who use Apple Pay and HSBC’s PayMe.

Hongbao promotion falls flat

Chinese firms have attempted to replicate promotional activities that proved popular in the mainland in Hong Kong, but they haven’t enjoyed the same level of success. 

Tencent rolled out WeChat-based Hongbao, red packets filled with money that are traditionally given out on special occasions, in Hong Kong as a digital way of gifting money, but interest was lackluster.

Offering discounts at fast-food restaurants and convenience stores has proved successful in the market, however. Both WeChat Pay HK and AlipayHK provide discounts and coupons occasionally when users make payments through their mobile wallets.

An Alipay sticker shows consumers how to pay on mobile phones. (Image credit: TechNode/Shi Jiayi)

In the interview with TechNode at RISE, Quincy Lin, a 23-year-old entrepreneur, said he was skeptical about the sustainability of this promotional method. “I wonder if they don’t have these coupons anymore, will people still use it [mobile payment apps],” he said.

An AlipayHK spokesperson told TechNode that providing offers and discounts together with merchant partners is one of the company’s ways of encouraging people to use the mobile wallet, but it also planned to support more merchants in a bid to attract more users.

Data concerns

Over half of respondents to the HKIRC survey said they were concerned about cybersecurity and privacy issues related to mobile payments. This indicates that Chinese firms may face a harder struggle than expected to gain a firm foothold in the market. 

“I really hope Hong Kong can catch up with mainland China, where most people don’t really use cash anymore. But I do have concerns about the security problem,” said 23-year-old Hong Kong resident Aka Chung in an interview with TechNode.

AlipayHK and WeChat Pay HK come under greater scrutiny because of their link to their mainland equivalents. Both of them require real-name verification before transactions can happen.

To address the concerns, Jennifer Tan, chief executive of AlipayHK, said in July 2018 that AlipayHK would only require limited personal data from Hong Kong users like their mobile numbers. Data is also not shared with the mainland unit, she added. 

Professor Liu maintains that while mainland users previously had similar concerns, they have now come to accept mobile payments as a regular transaction method after decades of development in the country’s e-commerce sector. 

“Hongkongers’ consumption behavior is still more western-style,” said Liu. “But if they start by making small-scale payments, I’m sure they will gradually accept it.”