Retail and shopping play an important role in Hong Kong’s economy: the industry accounts for more than 4 per cent of the country’s GDP. Traditionally, cash has been the most popular method of payment in this Asian country, but the latest technological advances have transformed the way merchants and consumers approach payment transactions. This means that ‘plastic money’ is becoming increasingly popular. According to recent research, in 2011 there were more than 15.5 million credit cards in use in Hong Kong, and the figures have risen since. More recently, contactless and mobile payments are gaining popularity too. This article reviews the modern history of payment transactions in Hong Kong, from the 1950s to the present day.
The beginnings of credit cards
Although the concept of paying for goods or services by using a charge card had been around for a while, it was not until 1958 that credit cards as we know them today were launched for the use of the general public. These cards first appeared in the United States and their success among consumers and vendors meant that they were soon rolled out by financial institutions in other countries.
In Hong Kong, plastic money was readily adopted by consumers too. According to statistics released by the Hong Kong Monetary Authority, the number of credit cards in use in 2013 had increased by 5 per cent when compared with 2012. During the first three months of the year, nearly 110 million credit card transactions were processed in Hong Kong, and the total value of those transactions amounted to HK$126 billion. Using debit cards is also a common method of payment; the statistics show that during the first quarter of 2013 debit card payments totalled HK$62.4 billion.
Modern payment transactions: mobile and contactless payments
Despite the fact that credit and debit card transactions still constitute one of the most common methods of payments worldwide, the most recent advances in POS (point of sale) technology suggest that this could change soon. Consumers (both shoppers and merchants) are increasingly demanding enhanced convenience and the simplification of the payments methods available. The widespread use of smartphones was crucial in the development of digital wallets, which consist of applications that allow users to make purchases from their mobile phone without needing to use cash.
Some people affirm that mobile and cashless payments will soon become mainstream, especially in countries where new technologies are readily adopted. It is clear that convenience and ease of use are the major benefits associated with this type of payments. Shoppers no longer need to worry about carrying enough cash or about losing their bank cards, as payment transactions can now be smoothly carried out by simply pressing a key in their mobile phones.
Having one of the most highly developed economies of the region, it is not surprising that Hong Kong has been one of the first Asian countries to offer mobile and contactless payments to local consumers. In early November 2013, one of the country’s largest banking institutions introduced a Near Field Communication (NFC) payment solution that allows shoppers to top up their virtual wallets and make contactless payments in more than 9,000 outlets throughout Hong Kong. Shoppers using this solution will not only be able to make cashless payments, but also can use the technology to see their past transactions and to find local deals and offers.
It seems evident that the popularity of mobile and contactless payments will continue to grow in the near future, so whether you are a merchant or a shopper, it’s a good time to investigate the benefits of this new technology.
Kevin is currently at a retail academy and as part of his coursework has been looking at mobile shopping.