Apple Pay stimulates once moribund Hong Kong mobile payments market

Other major brand-name mobile payment systems operating in the city now include Samsung Pay, Android Pay, Alipay and WeChat Pay.

PUBLISHED : Tuesday, 22 August, 2017, 6:00am
UPDATED : Tuesday, 22 August, 2017, 5:38pm

More than a year since rolling out its service in Hong Kong, Apple Pay now finds itself competing in a crowded mobile payments market that had total transactions of HK$17.9 billion in stores and HK$11.6 billion online in the city during the first quarter of this year.

Experts said the state of mobile payment services in the city saw a rapid transformation after Apple Pay entered the market in July last year, as rival smartphone offerings affiliated with major brands like Samsung Pay, Android Pay, Alipay and WeChat Pay soon followed.

“Apple Pay has significantly accelerated the growth of mobile payments and transformed how consumers pay in Hong Kong,” said Caroline Ada, country manager at Visa Hong Kong and Macau.

An Apple spokesman pointed out that total transaction volume for Apple Pay in Hong Kong has increased nearly seven times since its launch last year. He did not elaborate.

Apple Pay uses near-field communications (NFC) technology built into iPhones and Apple Watch to allow for contactless payment in stores, which have point-of-sale terminals that support the service.

The credit card networks that Apple Pay supports in Hong Kong comprise Visa, MasterCard, American Express and UnionPay International.

Apple Pay currently accounts for nearly 90 per cent of all NFC transactions globally, according to Apple’s spokesman.

“Momentum is strongest in international markets where the infrastructure for mobile payments has developed faster than in the United States,” said Apple chief financial officer Luca Maestri in a statement. “Three out of four Apple Pay transactions happen outside the US.”

There are more than 20 million contactless-ready locations globally where Apple Pay is currently used, including more than 10,000 merchant stores in Hong Kong.

Industry sources said about 30 per cent of smartphone users in Hong Kong own iPhones, a situation that has helped push local Apple Pay usage. Government data show there were 16 million 2G, 3G and 4G mobile network users in the city as of May 31.

Spending volume by Standard Chartered Bank credit card holders in the city has increased 47 times since the first month of Apple Pay’s launch in the city, according to the bank.

Union Pay International, part of Chinese financial services giant China UnionPay, estimated that total debit and credit cards it has issued in Hong Kong is approaching 16 million, in which the growing trend is to use Apple Pay.

Live in 16 markets around the world, Apple Pay is also used to pay for purchases made within apps on the iPhone, iPad and Mac computers.

SmarTone Telecommunications chief executive Anna Yip said on Monday that “many millions of dollars had been spent previously by banks and other organisations” on campaigns to promote a range of mobile payment options. She said those options were not received well in the city, as consumers largely preferred traditional cash and credit card payments, as well as Octopus contactless cards for transport and small purchases in convenience stores.

Experts credit the Hong Kong government for sowing the seeds of change in the city with the passage of the Payment Systems and Stored Value Facilities (SVF) Ordinance on November 13, 2015.

The SVF scheme for payment providers is administered by the Hong Kong Monetary Authority (HKMA), which reported 16 licensees as of March 31.

Those licensees include HKT Payment, TNG (Asia), Octopus Cards, Alipay Financial Services, Hongkong and Shanghai Banking Corp, UniCard Solution and Tencent Holdings’ WeChat Pay Hong Kong.

Alipay is a unit of Ant Financial Services Group, which is an affiliate of e-commerce powerhouse Alibaba Group Holding. New York-listed Alibaba owns the South China Morning Post.

The HKMA said in June that total SVF transactions in the city reached HK$30 billion in the first quarter, including store point-of-sale payments, online spending and peer-to-peer transfer funds.

“Despite the 20 years that Octopus has been used in Hong Kong, it took Apple Pay and its competitors to actually bring mobile payments into the mainstream in the city,” said Paul Haswell, a partner at international law firm Pinsent Masons. “The number of competing mobile payment platforms in Hong Kong, combined with a reluctance by some parts of society to adopt these systems, means we’re at least five to 10 years away from being a cashless city.”

The global mobile payments market is forecast to reach US$780 billion by the end of this year, according to research firm TrendForce.