Date
23 October 2017
During China’s long National Day holiday break, the number of mainlanders who used Alipay abroad is said to have surged seven-fold, with HK recording the highest transaction volume among all travel destinations. Photo: Retail News Asia
During China’s long National Day holiday break, the number of mainlanders who used Alipay abroad is said to have surged seven-fold, with HK recording the highest transaction volume among all travel destinations. Photo: Retail News Asia

E-payments: After falling behind China, HK starts to catch up

The Hong Kong Monetary Authority, the city’s de facto central bank, has unveiled seven initiatives in relation to FinTech development. The move has been applauded by industry participants.

Still, many have criticized Hong Kong for its slow progress in this arena, in particular compared to China.

Well, I believe that has to do with the historical background.

As Hong Kong has sound financial infrastructure, and consumers can use a wide range of credit cards and have easy access to ATMs, there was little demand for new e-payment tools such as AliPay, WeChat pay or PayPal.

China’s situation is different. The country has a number of unique problems that somehow became the tailwinds for e-payment development.

The nation’s financial infrastructure remains underdeveloped, offering a vast market for internet giants like Alibaba and Tencent to thrive.

For instance, credit card payment is not that common in lower-tier Chinese cities. Most people have to take large amount of cash for shopping or dining out, given that 100 is the largest-denomination Chinese banknote.

An investigation revealed that the renminbi is the dirtiest paper money in the world. Each bill contains as many as 180,000 bacteria.

There are other issues. Merchants are worried that they may receive counterfeit money from customers. The need to physically deposit with banks the cash received also raised concerns about the risk of robbery.

It is against such backdrop, along with a more relaxed regulatory regime, that Alipay and WeChat Pay have been quickly accepted by Chinese consumers and merchants.

In other words, China’s prosperous online payment business owes much to the nation’s underdeveloped financial infrastructure. We can call this the latecomer advantage.

In contrast, Hong Kong has been mired in the firstcomer disadvantage. The city lacks incentive and room for innovation since its financial infrastructure is so well-developed.

That said, e-payment has begun to slowly gain traction in Hong Kong too.

During the eight-day National Day holiday break, the number of Chinese consumers using the online payment method Alipay abroad surged sevenfold, and per capita spending jumped by nearly 50 percent, according to Alibaba’s affiliate Ant Financial Services Group.

Among various markets, Hong Kong recorded the highest transaction number in Alipay settlements, followed by Thailand, Taiwan and Japan.

It’s reported that Alipay transactions spiked 13-fold in Hong Kong during the holiday break, and average spending per person reached 1,300 yuan.

Currently, over 8,000 shops in Hong Kong accept Alipay in renminbi , about half of them also accept Alipay HK in Hong Kong dollar.

Ant Financial said last month that it will create a joint venture this year with CK Hutchison Holdings (00001.HK) to operate its payment app in Hong Kong. Up to 230 Watsons stores under CK Hutchison now accept Alipay, compared with only 30 stores last year.

This article appeared in the Hong Kong Economic Journal on Oct 10

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

RC

Hong Kong Economic Journal columnist

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