The Hong Kong Monetary Authority (HKMA) issued the stored value facilities (SVF) licences to several companies including Alipay and Wechat pay. Alipay announced that more than 6,000 shops in Hong Kong will accept Alipay. Yet it is unclear if Alipay’s entrance in Hong Kong will alter the Hong Kong local payments scene in the near term.
Alipay rode on the success of Taobao by becoming the default payments service between Taobao merchants and consumers. Online shopping in mainland China prospered because physical retail in 2003 was less developed in most cities. But Hong Kong is always a metropolis with shops at different levels. According to a survey, only 24.4% people living in Hong Kong shop online. This is far lower than that in Mainland. Unlike mainland China, Hong Kong citizens enjoy relatively convenient physical shopping.
Octopus Card will be a tough competitor
Alipay will be confronted with a powerful competitor – Octopus card. Octopus is the most popular micropayment tool in HK. According to Wikipedia, the cards are used by 95% of the population of Hong Kong aged 16 to 65, generating over 12 million daily transactions worth a total over 130 million Hong Kong dollar. With the slogan “Making Everyday Life Easier”, Octopus can pay in public transport, convenience store, supermarket, fast-food restaurants, and on-street parking meters, etc. The incumbent has 20 years of the head start compared to Alipay.
The consumer behaviour in Hong Kong differs from that of mainland China too. When it comes to a larger transaction, for security reasons, many consumers tend to use credit cards or cash . Statistics from Wenweipo indicated that people in Hong Kong aged 18 to35 have an average of 2.5 credit cards and spend about HK$8000 every month, an amount about 36%of their incomes. Meanwhile, in Beijing and Shanghai, credit card ownership per head is 1.34 and 1.01 respectively.
Hong Kong is not a blue ocean.
Alipay’s business partners include Paytm in India, Rakuten in Korea, and Zulily and Jet.com in the US. It seems Alibaba, having laid a solid foundation for payment business overseas, is now building an ecosystem of heavyweight merchants globally. The expansion to Hong Kong will be challenging given the established local payments footprint. Alipay has altered the lives of the Chinese population. Chinese can pay, book various kind of tickets, order a take-out and do some small investment all on one app. The same extension can be imagined in Hong Kong, payments will be the first step but not the last.