Following their success in the mainland, China’s two largest mobile payment platforms, AliPay and WeChat Pay, are ratcheting up their expansion plans to Hong Kong. AliPay has been introduced in some wet markets in the city, while WeChat Pay has partnered with MTR as a payment option in ticket machines.
Francis Fong, Hong Kong Information Technology Federation honorary chairman recently sat down with the Hong Kong Economic Journal to discuss the contactless payment competition and Hong Kong’s prospect in becoming a cashless society.
HKEJ: Do you think Alipay and WeChat can conquer the “traditional and conservative” users?
Fong: There is no need to worry about the demand for their mobile payment service in this new market. They have already had a huge pool of mainland tourists in Hong Kong they can tap into.
Going forward, I believe they will burn money for promotion and marketing to capture the market here, just as they did in the mainland. As I understand it, they are offering zero handling fees. A further push would likely popularize cashless payments.
HKEJ: Secretary for Commerce and Economic Development Edward Yau and others say that Hong Kong lags behind mainland China in cashless payment because the Octopus card “was so successful” that the city stopped exploring other options. What do you think?
Fong: That has nothing to do with it [Octopus card]. It’s just one contactless payment operator. It is the government which takes the lead in developing mobile payment. Unlike in mainland China, operators in Hong Kong need to be granted a stored value facilities (SVF) license to launch their services.
The Hong Kong Monetary Authority granted the long-awaited licenses to 13 mobile e-wallet service providers last year; if they started to do that five years earlier, would we be able to catch up with mainland China? Only the HKMA will have the answer to that.
Hong Kong citizens are in general passive when it comes to switching to contactless payments. So if the government wants a boom in mobile payment, it needs to take a more proactive role to push the public.
HKEJ: As the city’s first cashless payment option, do you think the Octopus card is slow to respond to the booming mobile payment services around the region?
Fong: Hong Kong’s Octopus card uses the Felica technology, an RFID chip solution developed by Sony. It was just a tap-to-pay electronic wallet which is not capable for internet transactions; users can only reload with cash in specific locations such as 7-Eleven and Circle K stores.
The Octopus card went online in recent years. It launched an app for topping up and making online payments, providing the functions on the Android mobile devices. Soon, it would begin using QR codes to settle payments, to get around the lack of connectivity with iOS devices.
HKEJ: What is the difference in payment function between a physical credit card and QR code?
Fong: There are numerous security vulnerabilities and loopholes in the credit card payment system. Hackers can gain access to credit card information by stealing the card or simply taking photos of its front and back sides.
In contrast, during the transactions using a QR code payment solution, the device generates a one-time security code, which is only valid for about 30 seconds. That greatly reduces the security risk even if the hacker successfully cracked the customer’s mobile device. For Apple Pay transactions, it doesn’t directly share the credit card numbers with the merchant; instead, it creates a one-time digital token for each transaction.
HKEJ: Recently, other tech giants such as Facebook and Apple have launched their own peer-to-peer (P2P) payment functions. What do you think of the prospects of these new features?
Fong: While P2P payment looks like the next target for Facebook and Apple, I think P2M (person-to-merchant) will bring them the biggest value in the long term.
For example, when online merchants accept Apple Pay as a payment option, customers may not need to pay the balance with a debit or credit card in Apple’s Wallet app. Instead, they can pay directly via Apple Pay.
In the case of Facebook, it can connect merchants with a huge base of active users. Soon, in-game purchases, shopping in online stores on Facebook, and even paying for Facebook ads, could all be settled via Facebook wallet, bypassing credit card payment.
Adapted from an article published in Chinese in the Hong Kong Economic Journal on Nov. 24
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