Despite the major Hong Kong banks accelerating NFC investment, an analyst has cautioned that challenges remain before contactless payments can rival credit cards for profitability.
Hang Seng bank announced last week it is developing an NFC payments service in collaboration with MasterCard and local telco, PCCW. Rose Lee, Vice-Chariman and Chief Executive at Hang Seng bank, said “Hang Seng is committed to investing in the latest technologies to provide customers with fast, convenient and secure access to financial services. Our mobile contactless NFC payment service will expand the range of payment channels in Hong Kong and place us among the leading cities as regards the use of advanced payment systems.”
Despite Hang Seng’s investments, credit card payments will remain the dominant channel in Hong Kong in the short term. Earlier this week, MasterCard released a report titled Mobile Payments Readiness Index, placing Hong Kong in 15th place for mass adoption of mobile payments, with NFC being a core technology in that space. This significantly lags other major Asia Pacific markets, such as Singapore (1st), China (10th), and Australia (12th).
IDC Financial Insights market analyst, Michael Yeo Sek Pheng challenged the findings, claiming the Hong Kong market has great potential with NFC, and may prove a better launch pad for NFC to take off than more mobile-ready nations.
“Hong Kong is perhaps in a better position than Singapore, due to the cultural acceptance of NFC in the form of the Octopus card that has become an integral part of their lives,” Pheng said. “Swiping to pay is already very much carved in the local psyche, so this represents real value to users and merchants. The fact that the Hong Kong Monetary Authority is getting involved in NFC adds weight to this possibility.”
Pheng warns despite technology and cultural readiness, financial challenges may prevent banks from going ‘all in’ with NFC technology. Pheng noted shared profit with telcos and other partners means credit cards remain a more attractive business model for banks in the short term.
“Economies of scale will be key for banks being able to reap some rewards from their NFC ventures,” Pheng said. “However, the price of non-participation is high and will allow the other parties such as telcos to devise their own alternatives if banks do not get involved.”