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Exclusive Report: Top Five Trends in Hong Kong’s Digital Payments Landscape

By Wirecard Editorial Team

Evolving customer preferences, increased smartphone penetration and the proliferation of innovative solutions are transforming the payments landscape both in Hong Kong and globally.

With Hong Kong’s ecommerce market expected to grow at 7.4% to US$6.4 billion by 2023, the city presents massive opportunities for retailers as well as solution providers. There is also great potential in enhancing the customer experience and engagement with a new generation of payment users in today’s digital age.

To uncover insights into the digital payments landscape in Hong Kong, Wirecard, together with local retail technology company Tofugear, surveyed 1,000 consumers and 25 retailers.

What did we find? Our report revealed that there is an ongoing shift in the shopping and payment behavior amongst consumers, especially the Gen Z consumers, which presents a new challenge for retailers. While preferences and expectations in Hong Kong are varied, retailers need to embrace this diversity in their payment strategies.

Here are the top five trends from Hong Kong that industry players should look at – to develop a long-term payment strategy and provide a frictionless and consumer-centric experience.

1. Smart payments are on the rise among Hong Kong consumers

In Hong Kong, the mobile payment revolution has paved the way for a vibrant and inclusive payment ecosystem. In fact, we found that major e-wallets and payment tools from Hong Kong and overseas have begun to gain popularity here.

The Octopus Card remains one of the most popular means of payment in Hong Kong. It is a contactless stored value card that can be used in public transport as well as for purchases in supermarkets, convenience stores, vending machines and more.

Since the launch of the Octopus Card in 1997, Hong Kong is considered a front-runner when it comes to contactless and cashless payments. Today, 99% of Hong Kongers are using Octopus cards when taking public transport and 85% when making purchases at convenience stores and supermarkets.

A pioneer in contactless payments, Octopus Card is now an integral part of everyday life in Hong Kong, which is popular among both consumers and retailers. (Source: Wikipedia)

A pioneer in contactless payments, Octopus Card is now an integral part of everyday life in Hong Kong, which is popular among both consumers and retailers. (Source: Wikipedia)

Over the years, there has been an increasing number of new entrants into Hong Kong such as AlipayHK, Apple Pay and WeChat Pay, among many others. According to our report, we found that nearly nine in 10 consumers in Hong Kong used a digital wallet such as Alipay and PayMe in the last year. Credit cards are also the most preferred payment method for online transactions.

As consumers become accustomed to the various established payment modes, it is crucial for retailers to cater to these payment preferences and enhance the customer experience.

2. Hong Kong’s Fast Payment System (FPS) and QR code payment gain ground

The Hong Kong Monetary Authority (HKMA) launched FPS in September 2018, connecting banks and stored value facility (SVF) operators on a single platform, and enabling the public to make cross-bank payments with the use of the mobile number or email address of the recipient with funds made available almost immediately.

In addition, the HKMA has also introduced a generally valid QR (Quick Response) code payment in Hong Kong – also known as the Hong Kong Common QR Code (HKQR). The mobile app allows merchants to leverage a single QR code to accept different payment schemes, which accelerates the accessibility and efficiency of payments for customers.

With competition in the digital payments market heating up, it will be interesting to see how these new initiatives will drive Hong Kong towards its vision of a cashless future.

3. Convenience and speed are key at every touchpoint

According to our survey, digital wallets are popular across generations due to the convenience they provide – particularly Gen Z (those born between 1997 and 2012), millennials (those born between 1981 and 1996), and Gen X (born between 1965 and 1980).

Consumers’ need for speed is also another key aspect that retailers need to keep up. A Tofugear research conducted in 2018 found that half of all Hong Kong consumers are frustrated by long checkout queues in-store, and two in five Hong Kong consumers would abandon their shopping in-store and purchase online instead due to long checkout queues.

Thus, it is unsurprising that, according to our survey, fast checkout (65%) and good incentives and rewards (50%) are some of the top reasons why consumers in Hong Kong use digital wallets over other payment methods. Therefore, retailers need to leverage the right payment technology to make the entire shopping experience as seamless and convenient as possible to stay ahead of their rivals, or risk losing their customers.

Source: Wirecard’s The Digital Payments Landscape in Hong Kong report

Source: Wirecard’s report "The Digital Payments Landscape in Hong Kong"

4. The rise of the Gen Z shoppers

Amidst an evolving retail landscape, Hong Kong retailers have been shifting their strategies to cater to the younger generation. More than ever, they are facing a new generation, the aforementioned Gen Z, which is transforming the retail industry and comes with different shopping habits and preferences. Gen Z shoppers are more mobile, social and have higher expectations of an optimal shopping experience, such as greater speed, flexibility and personalization.

Our report found that Hong Kong online retailers are not catering to the Gen Z consumers when it comes to the payment options they offer. Among the Gen Z shoppers, pay on delivery and digital wallets are a much more popular payment method for this youngest demographic. Yet, only around 5% of all retailers offer a pay on delivery option for online purchases. This is also partially due to the popularity of using ‘personal sellers’ on social media among Gen Z consumers, where transactions are often paid for via pay on delivery or P2P transfer.

Gen Z is the most demanding when it comes to the shopping experience – it has to be mobile, fast and personalized

Gen Z is the most demanding when it comes to the shopping experience – it has to be mobile, fast and personalized.

5. Adopting a Unified Commerce approach to power the customer journey

The e-commerce market will continue to grow in Hong Kong, especially mobile commerce which bears enormous potential for retailers. Physical stores, on the other hand, will likely dominate retail for years to come. In fact, latest statistics show that 42% of the Gen Z shoppers prefer to do their shopping in brick-and-mortar stores, compared to 34% who prefer to shop in-stores and online equally, and 23% who prefer to shop online only.

As e-commerce and brick-and-mortar stores continue to play important roles in the world of retail, the customer experience needs to be at the center for retailers.

To do that, retailers first need to shift their focus to Unified Commerce, which is ‘the practice of providing flexibility, continuity and consistency across digital and physical channels to deliver a superior customer experience’ according to IT research firm Gartner. Customers today use an increasing number of channels to make purchases, and retailers need to ensure that they provide consistent and frictionless experiences across each channel and touchpoint. This means that from the moment customers enter the shop, be it in-store, online or both, to the moment they check out and receive their purchases, retailers need to offer shoppers a smooth and efficient journey.

As customers become increasingly tech-savvy, the merging of online and offline shopping experiences, increased convenience and personalized customer service will be key to improving customers’ satisfaction and driving sales for business growth in today’s digital age. By adopting a Unified Commerce approach through smart innovation, businesses can truly deliver a seamless and holistic shopping experience that customers expect.

Wirecard report: The Digital Payments Landscape in Hong Kong

For more insights, download our Digital Payments Landscape in Hong Kong 2019 report and infographic here, which also features views from companies such as Google Pay, Octopus Cards, TNG FinTech, Group, BBPOS Merchant Services, Zalora and SkyMart on how they are responding on these payment trends.

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