Hong Kong’s e-payment system lags behind as Octopus card and cash continue to dominate the market for shoppers and merchants

She expended HK$7,000 (US$895) over five days on repasts, attire, and beauty products. Despite having no issues with e-payments at most shopping centers and major chains, she couldn’t shake off the worry that she didn’t have sufficient cash on hand.

Hong Kong taxis with Octopus readers to accept payment through 2 QR code wallets

She asserted, “Hong Kong is an international financial hub, it’s hard to believe that some diners, shops, and taxi cabs only take cash.”
No official statement released regardless of city officials advocating for cashless payments and the existence of no less than 20 e-payment platforms. Hongkongers just gravitated toward paying with cash, or using credit cards and Octopus cards.
There was a significant shift that took place during the pandemic. In 2021, the government distributed HK$5,000 consumption vouchers to residents to aid in reviving the ailing economy.

A shopper uses their Octopus card to pay for goods. Small businesses have been resistant to embracing some e-payment systems. Photo: May Tse

There was a surge in usage of four designated e-payment platforms – the MTR Corporation’s Octopus card, Hong Kong Telecom’s Tap & Go, Tencent’s WeChat Pay and AlipayHK, a joint venture established by Ant Group, an affiliate of the Alibaba Group which owns the South China Morning Post, after the allocation of e-vouchers. Bank of China’s BoC Pay and HSBC’s PayMe also joined the list when two more rounds of e-vouchers were distributed in 2022 and last year. According to a survey conducted last year by Hong Kong-based consultancy Quinlan & Associates, Octopus, AlipayHK, and WeChat Pay were the most popular platforms as e-payment values increased by 14 per cent from HK$218.4 billion in 2019 to HK$249 billion in 2022. oficial data showed that mobile payments rose from almost half of all e-payments in 2020 to over three-fifths in 2022, with younger people embracing the method. Nearly ninety per cent of individuals aged 25 to 34 made mobile payments, compared to just 16.8 per cent of those aged 65 and above. Yet, there has been little progress in the adoption of e-payments in Hong Kong due to many small businesses’ reluctance to embrace it.
There is fragmented market with numerous platforms, resulting in relatively high transaction fees for businesses using e-payment systems. The connection between payment tools has also hindered the growth of the city’s ecosystem. Merchants who accumulate HK$290,000 worth of transactions within two years are eligible for a refund, but they must pay the payment solution firm 1.2 to 1.9 per cent of each transaction. Although emphasizing the use of cash, a payment options beyond that becomes critical for Jennifer Sham*, 42, a boutique owner in Tsim Sha Tsui, who prefers either going through bank transfers or paying with cash. She added that: “The transaction fee may seem trivial with each transaction, but those sums accumulate and eat into my profit margins. Privacy particularly worries me, especially since I don’t know how long the transaction records will be kept. The details from the transactions may surface when I file my tax returns, and I’d prefer to keep my income private.”
Chair of a committee of the Smart City Consortium, Ronald Pong, suggested the established Hong Kong banking system provides convenient and low-cost cash settlement services. Although the government has launched more than 100 digital-government initiatives, and introduced e-payment options using the Faster Payment System, it does not suffice in driving e-payment adoption and development.

Ronald Pong, chair of a committee of the Smart City Consortium, says the dominance of the Octopus card has hindered the development of the city’s e-payment ecosystem. Photo: Xiaomei Chen

He emphasized that the city is overwhelmed with over 20 e-payment means with limited profitability for each platform, especially since merchant transaction fees are the primary source of income. The dominance of the Octopus card has hindered the development of the city’s e-payment ecosystem, allowing only gradual acceptance of credit cards and QR e-wallets.

A sign advertising payment options in the government’s consumption voucher scheme. Platforms gained popularity during the period as residents splashed out. Photo: May Tse

Moreover, only 4,392 out of 11,500 public market stalls managed by the Food and Environmental Hygiene Department implemented e-payment systems despite a government subsidy offered in 2020 and 2021 that provided stallholders with a HK$5,000 grant to adopt at least one contactless payment method. There’s a dire need to offer payment options popular among the largest group of visitors, especially China, on a fundamental level. This is vital in elevating e-payment development and attracting more businesses to adopt these solutions.

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