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Mobile payments

From taxi drivers to its leaders, Hong Kong must join the digital revolution, but also beware of the risks

David S. Lee says it’s time for Hong Kong, a laggard in welcoming technological advances like mobile payments and driverless cars, to play catch-up, while considering the impact of such change

PUBLISHED : Tuesday, 27 February, 2018, 6:27pm
UPDATED : Tuesday, 27 February, 2018, 7:24pm

A record number of digital red packets were exchanged in mainland China during this year’s Lunar New Year. In Hong Kong, however, cash remained king as the exchange of lai see packets remained ubiquitous.

This seemingly small difference in payment preferences is a microcosm of the growing technological gap between the two markets, but it also portends impending changes that raise critical questions.

Hong Kong’s cash-is-king mentality extends to other domains as well, with cash payment of taxi fares a recent talking point. From Seoul to Singapore, taxi fares can usually be settled by cash, credit card, or some sort of digital payment method. Even across the border in Shenzhen, with just a smartphone, it is possible to ride a taxi and complete daily activities without ever touching cash.

Conversely, only a fraction of Hong Kong’s approximately 18,000 taxis are equipped for cashless payment, usually through Alipay or WeChat Pay.

Alipay and WeChat Pay now available in some Hong Kong taxis

Hong Kong’s Octopus card operator is trying to compete in the market but has garnered minimal interest for its QR payment service among taxi drivers. Hong Kong’s taxi drivers remain committed to cash.

The Luddite nature of Hong Kong’s taxi industry has been on full display over the past few months as these non-cash payment methods struggle to find acceptance.

Additionally, the emergence of ride-hailing platforms like Uber has also put pressure on the industry to change. This pressure is likely to intensify.

What’s holding Hong Kong back from becoming a smarter city?

Beyond poor taxi service and limitations with payment methods, there are larger issues to be addressed in the adaptation of new technologies in Hong Kong, such as job loss, data privacy and Hong Kong’s integration with mainland China.

All these seem to be missing from the debate.

For example, advances in artificial intelligence have made autonomous vehicles a reality. As this technology becomes safer and less costly, the call for it to replace human drivers will grow louder.

This is not a prediction of a far-off future. The Singapore-based ride-sharing company Grab is already testing driverless cars, as are Tesla and Uber. And Google’s Waymo has just received approval in Arizona to operate a taxi service using autonomous minivans.

Singapore’s Grab teams up with nuTonomy to test self-driving cars

When such technology eventually reaches Hong Kong, changes to the labour market will inevitably follow as taxi and truck drivers are replaced by driverless vehicles. Consequently, there will be a loss of unskilled jobs that could exacerbate Hong Kong’s economic stratification.

Another likely result is a change to the government’s taxi licensing regime. Because of the limited number of taxi licences available, for years Hong Kong taxi owners have been able to monopolise the market and keep the prices of licences artificially high. With the advent of the new technology, however, their ability to continue collecting monopoly rents will be disrupted.

Hong Kong’s taxi trade must face up to competition and technology

The issue of data privacy also needs addressing. The digital transformation has led to the emergence of a group of technology companies whose influence is becoming so pervasive – due to their economic size, expansive user base and diversity of technologies – that they pose a possible risk to the basic elements of governance and privacy. The recent investigation into the use of Facebook to possibly manipulate the 2016 US presidential election is one example.

There is concern that Chinese technology behemoths like Tencent and Alibaba [which is also the owner of the South China Morning Post] could share data with government authorities, which may result in unintended consequences for their users, although Alibaba has said that the government does not have unlimited access to corporations’ data.

Alibaba’s financial arm, Ant Financial, is developing a social credit score based on a user’s transactions, online behaviour and network interactions, which will provide a financial credit profile. Beijing has expressed a desire to roll out its own national social credit system by 2020.

After shopping, travel and health, China’s digital revolution has the tax system next in its sights

Technology-induced changes are affecting and will continue to affect traditional customs like the exchange of red packets and everyday activities like taking a taxi. While such digital transformations will make life more convenient for Hong Kong residents, the associated costs of such convenience will require consideration by Hong Kong’s regulators, civic leaders, policymakers and, most importantly, its people.

As Hong Kong continues its seemingly inexorable assimilation into mainland China, its residents will become more integrated into various forms of digital governance.

Perhaps such a change is inevitable, and even welcome by some, but with so much of Hong Kong’s political discourse focused on the socio-economic disparities in the city as well as its relationship with mainland China, awareness and thoughtful discussion of these issues is warranted, sooner rather than later.

There is so much more at stake than just the cash.

David S. Lee is a senior lecturer at the University of Hong Kong’s Faculty of Business and Economics