Octopus’ Hong Kong market dominance faces challenge from e-payment newcomers

Company’s poorly received app may not bode well in changing market

PUBLISHED : Wednesday, 04 January, 2017, 7:38pm
UPDATED : Wednesday, 04 January, 2017, 10:18pm

The Octopus card, the wallet staple of almost all Hongkongers and one of the world’s first and most widely used cashless payment systems, is racing to catch up with the changing e-wallet market.

Since its introduction in 1997, the contactless Octopus has been used to combat fare fraud on the MTR and quickly spread its tentacles to other areas: supermarkets, convenience stores, restaurants, postal services, building and school campus access, and even tracking down criminal suspects.

There are now 32 million of the cards in circulation – nearly four and a half times the population of Hong Kong.

But the technology is seeing its dominance challenged, as people increasingly rely on contactless credit cards and e-wallets.

Why Hong Kong going cashless is no small change

“We are well aware that customers do have a lot of choices, which is why Octopus needs to continuously create new products and enhance service,” said Sunny Cheung Yiu-tong, CEO of Octopus Cards Limited (OCL).

In response to intensifying competition, the company in November launched O! ePay, a smartphone app carrying out peer-to-peer payments and topping up Octopus cards.

But that product received a chilly reception. Initially, app users could only top up cards from one bank at a time and transactions were limited to HK$3,000 every two days.

Seven months later, Octopus increased the daily limit, ranging from HK$3,000 to HK$10,000, and users could top up their account from 21 banks, and 7-Eleven stores. The company also streamlined the registration process.

Octopus mobile payment app O! ePay raises transaction limit amid intensifying competition in Hong Kong

However, complaints persisted, about things like the app’s inability to replace physical Octopus cards for payments, and a cumbersome process to add value to Octopus cards, especially with iOS devices lacking near-field communication and therefore needing a separate card reader.

“[We] will expand the application of O! ePay to a wider arena, including online and proximity payment, leveraging the opportunities brought about by the new stored-value facilities regulatory regime,” Cheung said.

“At the same time, we believe physical cards are still much needed because of [their] simplicity and reliability.”

Since August, the Monetary Authority has granted stored-value service provider licences to 13 companies, with another eight to 10 companies expressing an interest in obtaining a licence.

Some of these companies have apps that include tap-and-pay functions, a capability which O! ePay lacks.

These enhanced products could even challenge Octopus in the future, if more retail outlets and transportation systems install card readers compatible with them.

“Hong Kong is a free market and OCL must stay competitive in all aspects, including public transport,” Cheung said.

“There is no finishing line for both Octopus and O! ePay, and we will do continuous enhancements and upgrade.”

Amid tidal waves of change in the e-wallet market, whether Octopus can successfully reinvent itself remains to be seen.