Mark O’Neill EJ Insight

In mainland, cashless is king but Hong Kong is more cautious

In a Zhuhai convenience store, I was buying a bottle of mineral water. Behind me in the queue were two students. "Can you believe this?" said one. "This foreigner is paying in cash. How backward can he be?"

The mainland is leading the world in abandoning cash as payment and replacing it with the use of mobile phones. According to figures from the People's Bank of China, mainlanders made transactions totalling 157 trillion yuan on mobile devices last year, more than 200 times that in the United States during the same period. The amount is expected to rise by 50 per cent this year and next, the bank said.

In per capita terms, China is the world's biggest user of mobiles for payment. The vast majority of customers are people under 50, especially the young who have grown up in the age of internet devices.

Mobile payment users in small towns and the countryside account for half of the total in China, with the percentage of users in the countryside even higher than in provincial capitals, said the Payment and Clearing Association of China. These people never had credit cards - they have jumped over that stage of financial development.

"I take a little cash with me when I go out," said Huang Mei-qi, a lady student in Zhuhai. "I can use the mobile to pay for almost everything - coffee shop, restaurant, shopping, buses and taxis. Then I do most of my e-shopping on my mobile."

As from Aug. 14, travelers on the 274 subway stations in Beijing can use a mobile to pay, provided they have one of 160 Android phone models and have downloaded the compatible app.

"Mobile payment companies were worried about their future just four years ago, but the spread of technology has exceeded the imagination of almost everyone," said Li Gang, a professor at the Tencent Research Institute.

This boom has been a bonanza for the companies that provide the payment platforms, especially Alibaba and Tencent. Last Thursday Alibaba reported an increase in revenue of 56 per cent to 50.2 billion yuan in the quarter that ended June 30. A total of 529 million use its Taobao shopping app on their smartphones every month, up 4.3 per cent from March, it said.

Even beggars in Beijing and Jinan, capital of Shandong province, use printouts of QR codes to show customers; they can donate money through apps such as Alipay and WeChat Wallet.

In Hong Kong, however, it is a different story. People use a variety of ways to pay for what they buy - cash, Octopus, credit card and cheque. The use of mobile phones to pay is limited. Shops that cater to mainland visitors have introduced this payment form to make it more convenient to them.

"My friends who come here from the mainland complain how backward is Hong Kong in this respect," said Edward Leung, who runs an e-commerce business in the city. "They have to bring 3,000-5,000 yuan in cash because they cannot use their mobiles in many places."

A study by an affiliated branch of the Junior Chamber International Hong Kong ranked the use of e-payments in different places on a scale of one to 10. Singapore scored 7.5, followed by Zhongshan with 6.9, Hong Kong and Taiwan with 6.4, Macau with 6.3 and Japan with 5.8.

"Backward" is a relative term. HK people have not embraced mobile payments mainly because they do not need to. It is a small city where shopping is convenient, not like the sprawling metropolises of the mainland where people buy on line to avoid long journeys to the shops. The other payment systems here are well developed and convenient.

In addition, the mainland has a vast army of cheap and willing men who travel by motorcycles and trucks to deliver goods to customers in all weather; while they receive a basic wage, the larger part of their salary is calculated by the number of deliveries they make. So they are under great pressure to put the parcel in the hand of the recipient.

The cost of labour in Hong Kong is significantly higher. Personalised delivery adds a substantial fee to the payment.

Leung said that HK lags the mainland in part because its people were not demanding such mobile payments. "Another factor is the quality of the political and financial leaders here. Do they really understand how these technologies work? I do not think so. That makes it hard for them to innovate.

"All the same, e-commerce in Hong Kong will develop. More and more small shops will close. How can they compete with the prices offered on Taobao which has entered the Hong Kong market?" he said.






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