Why Hong Kong going cashless is no small change
City’s cash culture persists, even as e-payments try to gain a foothold. But some in the city say change is inevitable
Hong Kong prides itself on being up to date with the latest technology, and the government likes to call it a “smart city”, but to really embrace that concept, many believe Hongkongers must abandon the idea that cash is king and join the global trend towards electronic payments.
Take Larry Salibra, a tech-savvy shopper, for example. He is frustrated that he is forced to carry cash whenever he is commuting around Hong Kong, even though at least a dozen e-payment options are available.
The entrepreneur and early adopter of Apple Pay – the US tech giant’s digital wallet service – likes the convenience and other incentives of cashless payment services, but has to pay cash for taxis and tunnel crossings, and at smaller retailers such as wet markets.
“I tend to go to restaurants that accept cashless payment. I don’t want to have to deal with cash,” Salibra said. “I don’t want to deal with the responsibility of carrying it around and losing it.”
Hong Kong was one of the first places in the world with a cashless payment system when it introduced the Octopus card in 1997, but since then e-payment options have mushroomed globally. And despite the city granting 13 licences for stored-value e-payment services, uptake has been slow.
A deep-rooted cash culture, an older population reluctant to adopt new technologies, and the fear of “Big Brother” snooping on transactions are some of the obstacles stopping Hong Kong from becoming truly cashless.
“Hong Kong is the most modern cash-based place I’ve ever seen,” said Simon Dixon, co-founder of global online investment platform Bank to the Future.
Taxis are one of the contributing factors to hard currency’s predominance, as well as some restaurants that only accept cash, such as streetside dai pai dong eateries and cha chaan teng tea shops. And computer stores will often add as much as 3 per cent to the bill for credit card payments, making cash often the preferred choice even when buying the latest technology.
Charles Mok, a lawmaker representing the IT sector, does not believe the biggest hurdle is the technologies themselves, but getting merchants to adopt them.
“Every time you see these e-wallets come [online], they always go to chain shops,” he said. “But nobody seems to be able to target or tackle the mom-and-pop shops.”
“I think that’s the blue ocean. That’s what [payment companies] should focus on,” he added.
All the while, other countries are looking to go completely cashless. Last month, Sweden’s central bank announced it was debating whether to issue a digital currency, as Swedes lessen their use of cash.
The country leads the world in cashless transactions, with nearly 80 per cent of purchases in stores made electronically.
In 2016, Britain’s Bank of England economists called on other central banks to issue their own digital currencies, to combat financial booms and busts.
Cashless payment is not only a trend in the rich world. India has recently seen a surge in cashless transaction apps, with street vendors settling bills on mobile phones.
The Indian government’s recent demonetisation of 500 and 1,000 rupee notes has also given a boost to e-payment companies and start-ups, who are hoping their products will help people avoid having to stand in line at banks for hours to make deposits
Cashless technology is also revolutionising traditional financing and investment. Individual investors, like Bank to the Future’s Dixon, are searching for ways to take advantage of digital currencies and payment systems. Dixon’s online investment platform allows anyone, he said, to invest in “anything that may be building the future of finance”.
“We funded a company called Uphold, which allows for completely free conversion of currencies using Blockchain,” he said, referring to the secure digital ledger technology used with e-currencies like bitcoin.
“We invested in the largest bitcoin exchange in India, which is [helping] those who might have been affected by the ‘war on cash’ happening there right now.”
Mainland China is also seeing rapid growth in cashless purchases. According to digital research company eMarketer, 195 million mainlanders were expected to use phones for purchases by the end of 2016.
The Hong Kong Monetary Authority does not have statistics on transactions using cashless payment other than credit cards, but a spokesman said the authority “has been closely monitoring the development of digital currencies and exchanging views with other central banks from time to time.”
In November, the government gave eight e-wallet providers their stored-value facilities licences, bringing the total of such licensees in the city to 13. A first batch of five was approved last August.
The latest approvals were for PayPal, tunnel toll payment system Autotoll, Optal, 33 Financial, UniCard, ePaylinks, TransForex and K & R International. The first batch was for Alipay Wallet, Tap&Go by PCCW’s HKT, Tencent’s WeChat Pay, TNG Wallet and Octopus O! ePay, run on Octopus cards.
Alipay is owned and operated by Ant Financial Services, which is an affiliated company of Alibaba, which owns the South China Morning Post.
Bitcoin entrepreneur James Bang said mainland e-wallet technologies have already leapfrogged those of Hong Kong.
Lawmaker Mok said that cashless payment technology would need to be as simple as tapping your smartphone to a reader before it could gain serious traction with the public.
Banks in Hong Kong, meanwhile, are studying ways to get more people to go cashless.
A spokesman for Bank of China said convenience, special offers and costs are factors that needed to be considered to promote cashless payment.
Andrew Eldon, HSBC’s head of digital for retail banking and wealth management, said the city had “many of the right conditions for [digital payments] to flourish,” adding that “cash clearly remains popular for some casual transactions, but we’re working on a consumer app that we hope will help develop a digital payments ecosystem for all kinds of transactions and provide value to both consumers and merchants.”
According to Bang, the Hong Kong government has failed to offer details on how cashless payment systems would be integrated into its “smart city” plans.
“If you want to be a smart city, a cashless society is a big part of that. But we don’t hear any big ideas or initiatives from the government,” he said.
“Hong Kong is such a small place it would be easy to implement.”
An option Hong Kong could use to get more people to adopt cashless methods would be to remove high-value banknotes.
The European Central Bank announced last May it would phase out the €500 note (worth around HK$4,000) by 2018, a move reminiscent of the US Federal Reserve discontinuing US$500, US$1,000, US$5,000 and US$10,000 notes in 1969.
For high-value purchases, consumers could opt for the convenience of paying cashlessly, or the inconvenience of a stack of dollar notes.
Some countries have brought in size limits on cash transactions, such as Italy, where since 2011 it has been illegal to pay cash for anything worth more than €1,000.
These measures were intended to fight terrorism, money-laundering and tax evasion, but as a side effect have pushed consumers towards cashless options.
“For those reasons, yes, cashless options can be good ... there’s much more control,” Bang said.
“But privacy would be the biggest [issue], with governments having that much control over all our finances and being able to see all our transactions.”
Cash transactions provide anonymity, which would be lost if payments were to become completely cashless. Cash is also a tangible asset, which eases consumers’ fears of bank account seizures, bail-ins or “doomsday” scenarios.
But Bang said a cashless Hong Kong is inevitable, simply because “Hongkongers love convenience.”
It is a matter of time and it all depends on when cashless payment options can become as easy as, or even easier than, simply scanning the Octopus card, he said.