27 October 2016
Contactless payments of all sorts are increasingly gaining ground in Hong Kong. Photo: HKEJ
Contactless payments of all sorts are increasingly gaining ground in Hong Kong. Photo: HKEJ

Contactless payment: From Octopus to digital wallets

The arrival of Apple Pay in Hong Kong has triggered enthusiastic discussion and comparison with the local Octopus card.

Before we enter into a debate, let’s talk about the development of contactless payments in the Western world and in China.

To begin with, contactless smart cards in foreign countries are at a similar technological level with Hong Kong’s Octopus Card, even though usage of these prepaid cards abroad is often restrained to fare collection for public transit.

The adoption of these smart cards is intended as a means to enhance the capacity in processing the massive volume of passengers.

The Toronto Transit Commission only began accepting Presto cards (Toronto’s equivalent of Hong Kong’s octopus card) for entry fare within the last couple of years, arguably because Toronto never have had the volume of passengers Hong Kong has.

Presto card machines are still unavailable for TTC buses or stations located far away from downtown Toronto, meaning they are still dependent on token or cash payment.

The usage of Oyster Card in London is similarly limited to public transport.

As for contactless credit cards, MasterCard in the United States concluded a market trial for PayPass in Orlando, Florida in September 2003, and has begun issuing MasterCard Paypass contactless credit cards through major financial institutions since 2005.

American Express also introduced the contactless credit card, ExpressPay, in 2005. VisaPay was not available in the market till September 2007. Banks in the United Kingdom brought in contactless credit cards in the same year, hoping to simplify the countless credit card transactions that are under 10 pounds.

By now, contactless payment technology has gone beyond prepaid smart cards and credit cards. With the rising popularity of digital wallets, mobile payment is now an available option for everyday users.

This change became apparent when Apple released Apple Pay in 2014. To be fair, Apple Pay is not the Western world’s first attempt at electronic wallets. The success of Apple Pay is probably based on the critical mass of consumers that Apple has already achieved.

Combined with Apple’s previous success with its payment mechanism in App Store, Apple Pay’s success was foretold.

Even though Apple Pay can be considered as an extension of credit card consumption as it is linked to a credit card (or credit cards), mobile payment technology allows users to conveniently leave the door with an iPhone and keep their numerous credit cards at home. Touch ID adds to that convenience by providing security measures in the payment process.

Yet this revolutionary means of transaction has long been present in Mainland China, and has been developed for use in a wide variety of settings.

Alipay, which is often referred to as Paypal with Chinese characteristics, handles internet transactions as a third-party guarantor, and deals with finance and investment. Alipay can be described as a forerunner of internet banking in Mainland China.

Another payment system, WeChat Pay, is designed to simplify payment and transaction process. As a result of its phenomenal flexibility and convenience, it has fundamentally reshaped how Mainland consumers spend and transact money.

WeChat Pay allows users to transfer money to their friends, hand out lucky money (hongbao) at fixed or randomized amounts to their friends, pay merchants, and even make payment through the scanning of QR code.

In major cities like Shanghai and Beijing, WeChat Pay’s presence is ubiquitous, be it global chains like MacDonald’s or self-employed individuals like taxi drivers. WeChat Pay is even used to pay salaries; transferring and collecting funds amongst friends and relatives are a piece of cake.

Compared with Apple Pay, WeChat Pay has a much lower barrier of entry. Regardless of whether you are a buyer or a seller, all you need is a smartphone with a built-in camera that supports WeChat to make or receive payment with your phone.

China seems to be leading around the world with its popular usage of mobile payment technology. Western countries seem to be more sensitive about security issues with contactless payment, so in many places stringent floor limits have been set for contactless transactions until recently.

For example, the Eurozone generally uses a 25 euro limit. By comparison limits for WeChat payments (50,000 yuan per day and per transaction for tangible products and services) are clearly more lenient.

WeChat Pay is the epitome of the mainland’s civilian technological innovation in recent years. Its convenience and coverage is unmatched by any other mobile payment mechanism.

In Hong Kong, credit cards and Octopus cards have taken root for many years; they have supplemented cash usage and offered a lot of convenience.

Octopus’ recent release of P2P “O!ePay” has been met with lukewarm reaction. Still, electronic wallets are increasingly available in Hong Kong. Only time will tell how the electronic payments sector will develop in our city.

Ben Kong is the author of this article.

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