1. The Hong Kong market is tech-savvy
“Hong Kong boasts a smartphone penetration of more than 87 percent,” says Angus Choi, CEO of JETCO. The company operates 3000 ATMs in Hong Kong, Macau and Mainland China, is behind the AliPay Express Payment system and has its own NFC solution. A P2P transfer platform is planned for early 2016. Hong Kongers also have the e-wallet options offered by the mobile network operators – HKT has Tap & Go; 3 HK offers the Citi Wallet and SmarTone also has system. Then there are the startups. Is there room for more innovation? Choi argues that there is. “The market and consumers in the city are ready for different contactless and mobile payment and money transfer platforms,” he says.
2. Making spending seamless
Mobile money is all about ease. To list but a few examples – AliPay has made it much quicker to make purchases on Taobao and Tmall.com. After shopping, you could go into Starbucks and get 20 percent off your coffee if you pay using Bitcoin via the Fold App; and then use PayPal to cover your Uber cab ride home. Business behemoths and startups alike are getting in there. In November, Cathay Pacific announced it was teaming up with payment solutions company Adyen, which, according to the South China Morning Post, “offers 250 payment methods globally via its payments platform”. In the startup space, in 2014, booking app HotelQuickly told StartUpsHK.com it was “the first travel merchant in Southeast Asia to integrate PayPal’s mobile SDK.”
3. Wearing your smart on your sleeve
This year’s GSMA Report for the Asia Pacific Region makes for compelling reading. NFC services are a key component of Mobile Money and, says the report, “as of June 2015, there were 165 live NFC services across the world, of which 45 are in the Asia Pacific region”. The key adopters are Japan and Korea, but China is chasing.
In April, the South China Morning Post reported that China’s largest domestic smartphone brand Xiaomi was partnering with AliPay to develop wearable payment devices. The newspaper stated: “The partnership aims to create wearable devices that are linked to the users’ identity so that they can make wireless payments with the wristband as well as a variety of other implementations such as opening hotel room doors or buying cinema tickets.”
This news followed the announcement in October 2014 that Intel is investing $28 million in five Chinese companies, three of which are in the wearables sphere. This year, we have heard from Mastercard that it has teamed up with NXP and Qualcomm. It will “…develop technology that makes it simple to enable secure payments on virtually any device or accessory”, reported Enterprise Innovation, and has already showcased prototypes including a key fob developed with General Motors and a wristband made by Nymi. Closer to home, the Shua Shua band, priced at around 170 yuan, which offers both fitness tracking and payment options, is now being used in Shanghai.
4. Apple versus Android = acceleration
No date as yet but Apple confirmed in November that Apple Pay is coming to the SAR and Singapore in 2016. The service will be rolled out first to American Express card owners. Tom Wills is a director at Ontrack Advisory, which helps clients in the payments industry use data science. He argues that while Apple Pay’s arrival is a big deal, “because it’s leading payments into the next generation of efficiency and security”, he states: “I don’t think it’s going to have a huge impact in Hong Kong straight away.” He points to Android’s dominance in the Hong Kong market. It will be when the Android e-wallet options – Samsung Pay, Google’s Android Pay and LG Pay – arrive, that numbers of users will swell, and that, he says, will happen very soon.
5. Smart phones, big data
The iPhone 6 has six sensors. If you consider the amount of data that this one device can collate and then consider that there are 1.8 billion unique mobile subscribers in the Asia Pacific region, you can get a sense of exactly how big the “big data” collected could be. Says Wills: “The data is useless by itself – but harvesting, correlating and analysing it can yield extremely valuable, actionable insights about your business that weren’t possible in the past. Knowing exactly what happened on a smartphone and the point of sale terminal it connected to right before a fraudulent transaction took place can tell you a lot about how criminals operate. That insight can be used to improve transaction security and reduce losses.”
6. No two markets are the same
In Hong Kong, smartphones dominate but in countries where feature phones are the norm, there are players developing mobile money services, which are locally focused. “Payment systems in each country tend to be built around the dominant consumer access technologies,” says Wills. He points to Smart eMoney in the Philippines and True Money in Thailand. However, smartphones, whilst becoming increasingly sophisticated, are also getting less expensive. Wills states: “Along with development of the Internet of Things, cloud computing, data science, biometrics, tokenisation, Host Card Emulation (HCE) and Blockchains, smartphones are gradually going to become the core platform for consumer payments all over Asia and all over the world.”
7. Is the Government on board?
Yes. Choi states: “We are seeing the government setting an example by endorsing the development of mobile payment services in the city. The Hong Kong Monetary Authority (HKMA) recently revised its Supervisory Policy Manual (“SPM”) for the risk-management of e-banking, allowing small-value funds transfers of up to HK$3000 over two days between Internet bank accounts. These guidelines will help speed up the development of P2P fund transfer services in Hong Kong.” However, he argues, the SAR is playing catch-up. “While e-commerce and online payment are already very popular, Hong Kong is still lagging behind other Asian markets in mobile banking and payment adoption. This can be attributed to government policy and a lack of technology and interbank infrastructure. Furthermore, the complexity of the technology and high cost of investment are barriers to some banks, particularly the smaller ones.”
8. Regulators, mount up!
In November, the HKMA announced of a mandatory licensing system for multi-purpose stored value facilities and retail payment systems. Choi says this “…will facilitate the entry of more third-party payment vendors into the Hong Kong market and make the local market more competitive.” An e-wallet startup founder, who asked to remain anonymous argues, however, that it could be catastrophic for startups who want to grow in Hong Kong. He says: “The new law says that you need to get a license that costs HK$113,000 per year, you need to recruit two local executives and you must prove that you have HK$25 million. It will bankrupt any local e-wallet business. Breaking the law means five years in jail and HK$1 million in penalties. In this respect, it’s probably the toughest and most startup-unfriendly regulation on the planet.” He does concede: “The good side is that there is a regulation and a government routine to handle these business. So, save for the devastating fees, penalties and requirements, I think it’s a good thing.”
Katie Scott is the former News Editor of Wired.co.uk in London. Now living in Hong Kong, she has written about everything from 3D nature documentaries to nanosatellites to the ramifications of Edward Snowden’s brief visit to the SAR, but is driven to find stories on innovation and innovators of any kind.