Hong Kong's mobile-payment services market is poised to balloon as residents become increasingly familiar with the new form of payment technology.

A survey shows that the proliferation of mobile-payment services in the SAR has resulted in the rapid growth of the number of people using them. High growth is expected for the city's mobile-payment market in the coming years.

Joint Electronic Teller Services (JETCO) interviewed 502 local residents in November last year to gauge their views on mobile payment services.

JETCO, which has more than 30 member banks in Hong Kong and Macao, was established in 1982 by Bank of China (Hong Kong), Bank of East Asia, OCBC Wing Hang Bank, Shanghai Commercial Bank and Wing Lung Bank. China UnionPay Co became a strategic investor in JETCO in 2015.

According to the survey, 76 percent of the respondents, aged between 18 and 45, had adopted mobile payment, while 43 percent had used mobile peer-to-peer (P2P) fund transfer services in the past three months. Another 40 percent of those polled said they were willing to switch to the service in the coming year.

Those surveyed also said they would like to see diverse mobile-payment services, including bill payment (70 percent); choice of credit cards, bank cards and bank accounts as payment methods (56 percent); cash top-up for stored value facilities (47 percent); electronic receipts (46 percent); cross-border payment (36 percent); and overseas remittances (30 percent).

"We believe the local mobile-payment market could soon see high growth when customers get more accustomed to using mobile devices to transfer funds," JETCO Chief Executive Officer Angus Choi Ping-chung said last month.

JETCO launched JETCO Pay P2P inter-bank platform early last year, enabling customers of participating banks to transfer funds directly to account holders of major local banks using recipients' mobile numbers.

Four local banks have so far joined JETCO Pay P2P. The service provider expects another four to five lenders, including Standard Chartered Bank (Hong Kong) and Bank of China (Hong Kong), to join the platform in the first half of this year. HSBC and Hang Seng Bank are in discussions with JETCO on whether to participate. In Macao, up to eight banks are slated to join JETCO Pay P2P this year.

Average monetary transactions involving the JETCO Pay P2P inter-bank payment platform at present stand at around HK$400 as customers pay small amounts to test online security and the platform's data protection.

Following the P2P service, JETCO may consider launching peer-to-merchant (P2M) cash top-up for stored value facilities by the end of this year. However, the service provider will not target cross-boundary payment and remittances as major business priorities for the time being.

"We're not afraid of competition from mainland players as we believe both mainland and Hong Kong companies can benefit if the market ecosystem is robust. We're striving to make the market big enough to accommodate all service providers to leverage their niches to attract customers," said Choi. "We believe all market players can develop their businesses if the market flourishes."

Despite the rosy prospects, market players need to harness a series of technological solutions to tackle customers' worries about security involving mobile payment.

Up to 57 percent of the respondents in the JETCO survey cited security issues as their biggest concern for not using P2P fund transfer services. This was followed by the lack of interoperability between their transfer platforms and those of friends (53 percent); and concerns over personal data leakage (51 percent).

JETCO is trying to improve security involving the use of mobile-payment devices through a bundle of technological devices, including end-to-end encryption, dynamic PIN keyboard functions and biological authenticity functions for verification, said Choi.

Along with the P2P mobile platform, Stored Value Facilities (SVF) operators form the backbone of Hong Kong's mobile-payment industry. The Payment Systems and SVF Ordinance came into effect in November 2015, heralding the launch of a new regulatory regime for SVF service providers.

The Hong Kong Monetary Authority (HKMA) - the city's de facto central bank - issued the second batch of SVF licenses late last year, bringing the total number of SVF licensees in the market to 13. Some of the licensed SVF operators include Alipay Financial Services (HK), HKT Payment, Money Data, TNG (Asia) and Octopus Cards-which, respectively, provide e-wallet services through Alipay, Tap&Go, WeChat Pay, TNG Wallet and O!ePay.

One particular aspect of the legislation is to require all SVF providers to segregate clients' float money from their own funds and transfer the float money to a third-party trust to ensure adequate protection of clients' float money.

To maximize consumer and investor protection, the HKMA has adopted a risk-based and technology-neutral approach for regulation, whereas it will examine the nature and magnitude of financial risks involved in financial transactions or products without positive or negative discrimination on whether new technologies are used.

oswald@chinadailyhk.com

An Apple Pay icon is displayed on an iPhone. US technology giant Apple launched its mobile-payment service Apple Pay in Hong Kong in July last year, allowing users to pay for goods and services with their mobile phones. As financial technology expands in the city, the mobile-payment sector is set to provide convenient and secure payment services to all mobile users. Anthony Kwan / Bloomberg

(HK Edition 01/10/2017 page9)