Date
19 July 2018
E-payment service providers in Hong Kong are stepping up efforts to break into the taxi market. Photo: Bloomberg
E-payment service providers in Hong Kong are stepping up efforts to break into the taxi market. Photo: Bloomberg

Can mobile payment take off in Hong Kong taxis?

With the mobile payment battle heating up in Hong Kong, the taxi market has come under renewed focus with almost all key players seeking to tap into the largely unoccupied segment. 

The e-payment systems operators are, however, aware that they have a big task on their hand in getting the taxi drivers to change their habits and shift to a cashless mode. 

Convincing the cabbies to shed their apprehensions about new fare settlement methods requires a multi-pronged approach, including convincing the drivers about the benefits of new technologies.

The latest effort has come from Octopus Cards, which runs the stored value smart-card payment system that is widely used by Hong Kong people daily for bus, train and ferry travel and small-value transactions at retail outlets. 

On Monday, Octopus CEO Sunny Cheung told the media that the firm will again explore expansion into the taxi industry by allowing taxi drivers to collect fares through NFC-compatible smartphones with a dedicated smartphone app.

Passengers can simply swipe their Octopus card on a driver’s phone to pay for the fare, or scan a QR code to settle the payment.

Octopus will boost marketing and promotion efforts to convince taxi drivers to adopt the new payment system and move away from entrenched habits of accepting only cash.

The dedicated smartphone app will contain a feature that will allow passengers to pay extra tips to drivers, something that should encourage the cab operators among other planned incentives.

This is not the first time that Octopus has sought to explore the taxi market. In 2012, the company planned to expand its network into cabs by advising taxi owners to install Octopus card readers in the vehicles to collect fares from passengers.

However, taxi drivers refused to do so due to several reasons. One is the belief that they would earn less tips as taxi passengers would settle the fare electronically, paying the exact amount.

Another factor that put off drivers is a rule that required them to pay HK$250 monthly rental for the Octopus card reader and an administration fee equivalent to one percent of the daily income. 

Taxi operators felt that Octopus was asking too much from them, prompting the drivers to shun the service.

Having learnt some lessons from that failed attempt, Octopus has now come with a new plan which it believes will give it a better shot at capturing the market. 

This time, drivers will not need to pay for rental of a machine as they can use their own smartphones to get the transaction done. A dedicated app installed on the phone will feature a card reader that can capture the payment from the passenger.

Also, Octopus will not charge administration fees in the first year of service.

Still, there is the issue of time lag between the transaction and when the money actually gets transferred to the driver’s bank account.  

One of the key reasons why taxi drivers are reluctant to adopt mobile payment is that the money they receive from the passengers gets transferred to drivers’ bank account only after two days or so.

Octopus says this will not be an issue in future. Once the Hong Kong Monetary Authority launches the so-called Faster Payment System, expected in September this year, real-time settlement will be possible, enabling taxi drivers to get their money instantly.

Octopus’ latest effort to break into the taxi market comes after Alibaba affiliate Alipay and Tencent unit WeChat Pay have begun to aggressively roll out mobile payment services in Hong Kong, luring customers in sectors such as catering and retail as well as transport.

Taxi market is seen as a particularly untapped field, given the fact that cash still rules the roost in the business.

Late last year, Alipay HK and WeChat Pay HK, as well as Octopus itself, rolled out QR code payment services targeting the taxi segment.

Each driver would have a dedicated QR code and passengers simply scan the driver’s QR code to make the payment. 

However, despite high-profile marketing campaigns, not too many taxis have started accepting the e-payment methods. 

Some taxi drivers refused to accept payment through passengers’ mobile wallet, citing complicated procedures of the whole transaction.

To resolve such issues, there is no doubt that e-payment systems operators will have to make concerted efforts to inform and educate taxi drivers about the benefits of going cashless, touting aspects such as security, ease of transaction, potential rise in earnings, etc. 

Apart from these, the operators should offer attractive incentives, including generous cash rebates, to encourage taxi drivers to adopt mobile payment systems.

Apart from Octopus, Alipay HK and WeChat Pay HK, Tap & Go by HKT is also involved in the taxi market as it has teamed up with Syncab and Jumbo Taxi to accept Tap & Go for taxi fare payment.

The payment service platforms are trying their best to break into the cash-dominated taxi industry by introducing new technologies, but they will see results only if they make sustained efforts.

The companies may need to spend a lot initially and sacrifice profits in the short term if they want to capture long-term rewards.

The road may be bumpy, but if the e-payment systems firms keep at it through all-out efforts, it will be just a matter of time before the taxi sector begins embracing mobile payments in a big way.

That will be good news for the public as well as the Hong Kong government, which is trying to transform the city into a cashless society.

– Contact us at [email protected]

RC

EJ Insight writer

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