Hong Kong’s banking heavyweights scrap it out for business as cashless payment system goes live

Hong Kong’s leading lenders are locking horns in a battle royal for new digital payment customers, after the authorities launched their ambitious “Faster Payment System” last weekend, which now allows the transfer of money and bill payments using the swipe of a quick response (QR) code on their mobile phone.

The move is considered the boldest yet by the Hong Kong Monetary Authority (HKMA), the de facto central bank, in its efforts to turn the city into a future cashless society, dominated by cutting edge smart banking systems.

Individuals, companies and most-importantly retailers, after registering a mobile phone number or email address with their bank or e-wallet operator, will be able to transfer money to others using a swipe of their mobile.

The system allows customers to pay in shops, restaurants and retail outlets using their bank accounts or e-wallets, and pay utility bills.

The platform started accepting registrations from September 17, but actual money transfers only went live from Sunday.

More than 450,000 individual registrations have been recorded, said HKMA chief executive Norman Chan Tak-lam, split 328,000 by mobile and 70,000 by email. Some 58,000 corporate registrations have been logged.

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Twenty one banks and 10 e-wallet operators have joined in, including all the major players including from HSBC, Citibank, and Bank of China (Hong Kong), Alipay, WeChat Pay, and the ubiquitous Hong Kong payment card, Octopus.

It is the first time Hong Kong users of Alipay and WeChat Pay, China’s two dominant cashless payment operators, will be able to transfer funds to each other.

The new payment service, which is free for customers, is being paid for by fees from participating merchants, who in turn charge the banks, although importantly that is likely to be slightly lower than credit cards, the use of which merchants charge between 1.5 and 2.5 per cent of the transaction value.

In mainland China and many other markets, swipe payments have become the norm for millions. But in Hong Kong, the phenomenon is only just starting.

“Banks have to compete for merchants using the new payment system. Besides the income from the payments, banks can also benefit from cross selling other products,” said Jeffrey Chan Lap-talk, the founding partner of Oriental Patron Financial Group.

“Banks failing to tie up with merchants could lose out to rivals.”

HSBC, the city’s biggest lender, is considered the most aggressive so far in signing up new customers, and has already tied up with a number of big names such as Hong Kong Electric, GoGoVan (the on-demand van hire service), travel companies Jetour Travel, EGL Tours, and retailer Chung Yuen Electrical.

“Our team has visited more than 1,000 merchants and all of them are interested in accepting Faster Payment System,” said Terence Chiu, head of commercial banking at HSBC Hong Kong.

GoGoVan co-founder Reeve Kwan said many of his drivers currently accept cash, but the tie up with HSBC Faster Payment System will allow customers to pay using their mobile phones.

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“We expect 30 per cent of users to pay via Faster Payment System within the first year and our numbers to grow 20 per cent as a result of the more convenient payment method,” he said.

Sal To Wing-nin, director of Yixin Catering Group which operates restaurants in Wan Chai and Causeway Bay, said he too would tie up with HSBC to use the Faster Payment System, if charges indeed turn out to be lower than using credit cards.

“The younger generation of customers will want to pay by scanning a QR code. We need to cater to their needs. At present, around 80 per cent of customers pay by credit card and the rest by cash,” he said.

“The new payment system is set to see more customers opting to pay by scanning a QR code.”

Bank of China (Hong Kong), or BOCHK, is also reportedly in talks with 400 merchants to sign up to its new payment services, and its big-name customers already include Towngas and its 1.8 million bill payers.

It will waive the fee for merchants for three months and has assured that subsequent fees will be lower than other payment methods, such as credit card.

W K Lo, general manager of corporate treasury and investor relations at The Hong Kong and China Gas Company, which operates Towngas, said the link-up with BOCHK “will enable customers to pay bills at home and improve payment efficiency for the company”.

Charity donations are also now possible using the system, after BOCHK allied with various organisations, such as residential care centres Po Leung Kuk, for which the bank will waive transaction fees.

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Standard Chartered Bank, Citibank and Bank of East Asia have all said they too are in talks with merchants across the city to use their newly installed QE payment methods.

And of course, anxious not to miss out on the action, the major credit card operators have been seeking alliances to maintain their market positions.

Mastercard on Thursday tied up with education app developer GRWTH to allow parents and students at 10 schools to pay their tuition fees and other expenses, such as lunches via an app on their mobile phone.

“By connecting the education, finance and technology sectors, we aspire to push forward the development of digital payments in Hong Kong,” said Adam Chan, co-founder and chief executive of GRWTH.

Helena Chen, Mastercard’s managing director for Hong Kong and Macau, played down the threat of the Faster Payment System to the credit card market.

“We support the HKMA’s new payment system, which provides a new payment method in Hong Kong,” Chen said in a media briefing on Thursday.

“Using Mastercard’s technology, we can truly lay the foundations for the future of our next generation, and push forward the development of Hong Kong as a smart city.”