Octopus takes mobile step to winning more customers

Dominant operator of electronic payment system seeks to beat competition by allowing purchases to be settled through the handphone

PUBLISHED : Monday, 09 September, 2013, 12:00am
UPDATED : Monday, 09 September, 2013, 3:44am

Making purchases with a smartphone is gaining a foothold in Hong Kong, and it has changed the habits of Sunny Cheung Yiu-tong, a die-hard fan of smart cards.

Cheung, the chief executive of Octopus Group, sometimes leaves his Octopus card at home, using his mobile phone to make payments instead.

Octopus Cards, which runs the city's earliest and dominant contactless smart card system, says competition from banks in payment technology is intense but it fights to maintain its pioneering advantage by providing a variety of ways to pay, such as Octopus watches instead of cards, and now by flashing the mobile.

HSBC and Hang Seng Bank have launched services using near-field communication (NFC) technology to allow holders of credit cards to pay for transactions with smartphones linked with the card accounts.

Users pay by flashing their NFC-ready smartphones on a card reader, similar to using Octopus cards.

The Hong Kong Monetary Authority has said it aims to facilitate the development of NFC mobile payment services in Hong Kong, following the United States, Britain, France, Japan and South Korea, which are planning or launching such services.

"When I don't want to carry a bag or a wallet with me, I usually pay using the mobile phone," Cheung, who has more than 10 Octopus cards, told the South China Morning Post.

To understand the competitive landscape in the contactless payment market, Cheung said, he and his colleagues familiarised themselves with the NFC services banks were providing.

"After we tried their services, we could tell what the advantages of these new services were and think of ways to do better than them," he said.

Banks are partners as well as competitors with Octopus Cards, said Cheung, a veteran banker who worked for Visa, DBS Bank and Citibank before he joined Octopus in 2011.

The firm, in which MTR Corp is the largest shareholder, has partnered Citibank, China Construction Bank (Asia), Dah Sing Bank and DBS in issuing co-branded cards that combine the functions of a credit card and an Octopus card.

"If we just viewed banks as our competitors, the customers would find it less convenient because they might have to carry two cards," Cheung said.

By the fourth quarter of this year, smartphones will be able to perform the functions of an Octopus card. They will be able to support transactions with a limit of HK$1,000, higher than the cap of HK$500 for NFC services at HSBC and Hang Seng, the only banks that have launched such services so far.

A limited number of merchants have set up NFC readers in their shops.

The number of outlets with MasterCard PayPass terminals, used for Hang Seng's NFC services, has increased to 3,000 from 1,000 in June.

The Octopus phone user will need to install in the smartphone a special SIM card that allows the phone to function as an Octopus card. Certain Sony and Samsung models might be the first smartphones capable of the new service, the firm said earlier this year.

Cheung said it would be "cool" to be able to use the mobile phone to settle daily transactions.

The Octopus system handles more than 12 million transactions valued at more than HK$130 million each day. More than 22 million cards were in circulation at the end of last year, up 12.6 per cent from 2011. Each Hongkonger has an average of three Octopus cards.

The company is talking to various parties to expand the use of the cards, such as paying tunnel fees.

"We are not concerned about what will become the mainstream electronic payment method, but we hope to provide as many choices to customers as we can," Cheung said.