The Octopus Card remains one of the most popular means of payment, along with the credit card and cash, especially in the public transport sector, which is not surprising, considering that the card was founded by public transport operators such as MTR Corp., Kowloon Motor Bus, New World First Bus and City Bus.
Despite its long-established role as a payment system in the city, however, Octopus has found it difficult to expand its offline dominance into the online world. In fact, it is now facing keen competition from online and mobile wallets, which can be used to settle both offline and online transactions.
Since New Year’s Eve, Octopus is no longer accepted as a form of payment at Taobao.com and Tmall.com, which are both controlled by e-commerce giant Alibaba Group.
This will force online shoppers who are currently using Octopus and Jetco accounts to switch to other payment methods such as AlipayHK, PPS and credit card and PPS to settle their online transactions. Alibaba Group, according to local media reports, stopped its partnership with Octopus because of the latter’s low usage compared with other payment channels.
Ming Pao reported on Monday that Hong Kong consumers at Taobao and Tmall used PPS more than Octopus and Jetco.
In fact, using Octopus to settle online transactions is a little bit complicated for general users. Online shoppers first need to use an NFC-compatible Android smartphone and install the Octopus app into their device.
When they check out at the Taobao or Tmall, and choose Octopus for payment, a QR code will pop up and they are required to scan the code via their Octopus app. Then they must place their physical Octopus card on the phone to complete the payment.
Since the Octopus card itself is not connected to any online account, that’s the only way for Octopus users to use their card online.
By comparison, consumers using the PPS service only need to log in to their PPS account and confirm the amount to be paid to settle the transaction. That’s only two steps, compared with four steps using the Octopus card.
That’s the most likely reason why Octopus has low usage in online transactions. And that’s probably one of the reasons why Alibaba thinks they cannot support Octopus any longer.
However, some market analysts believe that Alibaba’s decision is meant to encourage Hong Kong consumers to switch to AlipayHK, an affiliate company, which is definitely preferred for Taobao and Tmall shopping.
Other media reports speculate that Alibaba’s decision was due to Chinese regulatory requirements.
Octopus has been encountering stiff competition from digital payment platforms such as AlipayHK and WeChat Pay HK since the Hong Kong Monetary Authority opened the market for stored-value facilities for mobile and online payment.
While Octopus continues to dominate offline public transport transactions and a significant portion of the chain store payments in Hong Kong, its users are becoming increasingly aware that they the old system can hardly be used for online transactions.
Octopus has launched a new service called O! ePay, which is a digital version of the Octopus card. However, the main disadvantage is that the new service has no direct connection with the users’ existing Octopus card. They still bee to top up their cards, rather than directly use O! EPay as a replacement for their Octopus card.
Since it has lost its role as a payment gateway to Taobao, Octopus may now find it hard to further expand into the e-commerce market given the limitations of its system. Octopus will need to discuss access to online payment systems with different online retail stores individually.
And due to the inherent inconvenience of using Octopus for online payments, the response from online outlets is likely to be cool. Currently, only about 50 online merchants accept Octopus for online payment and most of them are not big names in the e-commerce sector.
On the other hand, its two mainland rivals, AlipayHK and WeChat PayHK, enjoy the advantage of being convenient methods of payment for both online and offline transactions in Hong Kong and mainland China.
Indeed, Octopus must look for a clearer market position in order to defend its market share.
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