The Covid-19 pandemic has accelerated the digital transformation of almost every business. Behind the changing habits of consumers and companies, payment transaction options became a core component in transforming the interaction of brands and audiences, experience, engagement and marketing communication channels.
Fintech provider FIS issued its 2022 Global Payment Report and projected that cash will drop from 17.9% ($8.3 trillion) of global POS transaction value in 2021 to 9.8% ($5.8 trillion) by 2025.
Forecasting from the Financial Services Development Council of Hong Kong shows that paper money and coins will account for no more than 1.6% of point-of-sale (POS) transactions by 2024, down from 9% in 2019.
Meanwhile, the consumption voucher scheme initiated by the local government in 2021 during the pandemic has changed the payment habits of residents in Hong Kong over the past year.
The city's HK$ 36 billion (US$ 4.6 billion) “consumption vouchers” encouraged the use of payment channels, such as AlipayHK, WeChat Pay HK, and Tap & Go, transforming payment apps into platforms of interaction with consumers and changing business models of brand marketing.
A Kantar survey indicated last year that 53% of respondents chose Octopus to receive vouchers. In comparison, 27% are estimated to use Alipay, 11% via WeChat Pay and 9% for Tap & Go.
Because of consumption vouchers, more e-payment channels became part of people’s daily lives. Hong Kong’s very first e-payment channel Octopus is facing stronger competitors such as fintech giants Tencent and Ant Group, as well as large banks HSBC and Bank of China joining the competition. Meanwhile, e-payment channels went beyond the ecommerce platforms and gradually took over brick-and-mortar stores in the local market.
In the second phase of the 2022 consumption voucher scheme, the Hong Kong government introduced six e-payment channels to store values: Octopus, AlipayHK, WeChat Pay HK, Tap & Go, BoC Pay, and PayMe from HSBC. This time, as more residents joined the scheme, qualified migrants, entrepreneurs, and students pursuing further studies in Hong Kong could receive HK$5,000 consumption vouchers, though foreign domestic helpers and foreign domestic workers would not benefit.
With the new round of consumption vouchers becoming available in early August, Campaign reached out to marketing experts from agencies and payment businesses to share their vision and advice for brands in a near-cashless society and how the increasing e-payment trend will affect marketing in Hong Kong.
Havas Hong Kong
The changes provide brands and payment channels plenty of collaboration opportunities - to drive sign-up, develop habitual usage, stimulate short-term sales, and more. This trend is particularly prevalent among retailers, who can offer a higher percentage of rebate by paying with PayMe at Mannings, for example.
It also provides brands and agencies with more insights into how consumers are spending and where they are spending through digital tracking.
We ought to ensure not only technology and hardware, but also customer experience has a smooth transition in the cashless movement. It's also important to ensure that having cash is not going to be a barrier to those late adopters (they are resistant to digital payment for different reasons like privacy) who are concerning about no cash transaction choice available for them at some shops.
Definitely, the consumption voucher scheme has helped to drive the penetration of digital wallets and faster payment systems (FPS). The platforms got consumers signed up. What's next is to retain them and develop their habitual usage, determine which CRM/loyalty program plays a vital role and also requires the platforms to do more and regular with their retail partners.
The opportunity is huge to the digital payment platforms, I think cross-border payment is something they are actively exploring. Of course, it needs supports from the government as well. Probably, we will see more progress when the travel restrictions are eased and cross-border activities increased.
While the purchasing behaviour previously was seen simply as a transaction, with e-payment and digital wallets, it can become another touchpoint that allows for deeper engagement. Looking at it from a loyalty standpoint, returning customers can be offered personalised messages and offers on the point-of-purchase now.
Alipay Hong Kong, Macao and Taiwan
Thanks to the HKSAR government’s rolling out of consumption vouchers through e-wallets, coupled with recent years of pandemic driving more local residents to use contactless payment, e-wallets are rapidly gaining popularity in Hong Kong. As of now, more than 90% of local merchants already accept AlipayHK mobile payment, ranging from fish ball stalls to supermarkets and electronic stores. AlipayHK currently has over 3.3 million active users, which means apart from children under the age of 12, one out of every two Hong Kong residents uses AlipayHK.
In addition to using merchant payment codes offline, many merchants are starting to do marketing online in order to gain "private domain traffic", connect with target customers and convert to sales, resulting in acceleration of digitalization for local merchants. For example, AlipayHK recently offered a simple mini-app service called "Brand Channel" to merchants without the need to develop or install an app, helping merchants to bring traffic, connect with fans, and ultimately increase transaction frequency and value. According to our data, brand channel followers' transactions increased by 20% when compared to non-followers. More than 100 brands have joined the “Brand channel”, with one of our top merchants acquiring 270,000 fans in a month.
Business development director
We see a huge demand increase in digital payment in Hong Kong local market, especially for small and medium-sized enterprises. More and more mom-and-pop shops began to search for digital payment solutions.
Such a trend also changes the agencies’ business model as they now need to provide more accessible and cheap solutions for clients. It is a time for companies to show efficiency with a tighter budget.
Usually, SMEs prefer a one-stop solution, with value-add services. It really requires companies to use innovative technologies to explore the consumption potential of the customer base.
There are several things a brand can do to embrace a cashless society. First, complete preparation of the payment gateway. This is the basis for any brand to start their “cashless” experience. The online payment system should provide a comprehensive solution to connect with any e-wallet customers use.
Second, a digital-first mindset. We still emphasize the importance of offline presence. However, online engagement has proven its long-tail effect in many ways.
Last but not least, with the rise of big data analysis, Hong Kong e-payment service providers no longer just passively provide e-commerce payment and collection solutions. We will also develop a comprehensive business strategy for merchants based on their characteristics and the needs of individual industries, to help increase sales.
We see an average 88% sales increase brought by consumption vouchers in 30 days during the last batch (between March and April). More banks saw consumers’ demand for a cashless environment, and rolled out their e-wallets as well.
For Hong Kong, it helps to create a healthy yet competitive atmosphere. According to data from Statista Market Forecast, the size of Hong Kong's e-commerce market is expected to reach US$37.96 billion by 2025, while the total number of users to exceed 6 million, indicating a huge market for brands to go digital.
It also means easy monitoring for brands about their traffic. Brands can analyze big data through artificial intelligence to help them achieve their goals in the market.