The digital payment battle in HK

In a business world where winner takes all, late movers may have no more than five years left to play catch-up in the payment turf war. But if Hong Kong cannot confirm its competitive edge within the coming one or two years, it would be left well behind forever, Hung warned.

A teeming city of 7 million people, Hong Kong is anything but a market where digital payment operators could easily survive and thrive. There is no shortage of local e-payment platforms emerging as a fleeting show. Under the overwhelming dominance of the Octopus card and credit cards, very few will likely manage to fight their way into successful niche businesses, Hung added.

TNG, a Hong Kong-based digital wallet operator founded in 2013, finally gained a firm foothold by offering global money transfers, foreign-exchange transactions and bill payments, after a bout of failed partnerships with local merchants and public transportation operators.

The company polished its brand as "Hongkongers' e-wallet". But it turns out to be city's foreign domestic helpers, and underbanked or unbanked individuals in developing countries without access to banking services, who shore up its business at home and abroad.

Despite a tough market where 14 million Octopus card and 1.7 million credit card transactions are made on a single day, major digital payment operators worldwide are losing no time to muscle in on this Asian financial center, making the city a red-hot payment battleground.

"The sheer size of the local market looks not lucrative at all. But companies crowd into the territory in a belief that if they could survive in Hong Kong's stringent regulatory environment, they could gain a footing in any part of the world," Hung reckoned.

"With so many market players joining the fray/vying for a share, the major issue facing local consumers is they are bombarded with too many choices," Chan said.

"All of a sudden, they are told to pay via NFC payments like Apple Pay, Samsung Pay and Android Pay, or third-party mobile and online payment platforms like WeChat Pay and Alipay, without much idea about how to choose," Chan noted. "Apart from that, contactless Octopus card and tap-and-go credit cards are also available. You must admit that the learning curve could be rather steep."

To bolster the city's ambition of becoming a world-class smart city over the next five years, the SAR government unveiled a smart city blueprint in December last year.

However, the hot-button issue of payment systems is listed under the domain of "Smart Living", rather than "Smart Economy".

"This may indicate that the concept of digital payment remains being viewed in a narrow perspective," Chan said.

Payment, Chan pointed out, lays the foundation for a wealth of next big things. It stands as the building blocks for disruptions such as crowd-funding, peer-to-peer lending, online insurance, initial coin offering and other promising financial technologies.

Dismissing the idea that Hong Kong lags behind technologically in a worldwide payment competition, Hung believed the major hurdle comes from its mentality, which restrains the financial hub from truly recognizing the huge potential of the payment technology.

"Basically, I don't think Hong Kong could make much difference in the business-to-customer payment market. Whether Hong Kong should bother to develop its own payment system is also a question open for discussion," Hung said. "But what's going on in the city's nascent digital payment market just reflects some deeply-rooted problems, which reminds me of the tough and bumpy ride that sharing economy is in for in the territory."