The payment of about $640 each to more than 7 million people has triggered a spike in the adoption of digital payments by consumers and shop owners alike – with more than 2.2 million new digital accounts created in the past few months and the number of merchants accepting digital payments rising by 48,000.

This represents a significant shift to digital adoption, but it’s a transition that has been unfolding for a while.

Digital Leader

Hong Kong has a long history of being at the forefront of innovation for both finance and technology. Its free-market approach to trade and banking make it fertile territory for new economic ideas. At the same time, the highly educated and urbanized population has been an early adopter of digital solutions – with an Internet penetration rate of 92% and almost three mobile connections per capita.

Long before the government announced its plan to funnel vouchers through mobile wallets, the territory already was well on the way to switching from cash and checks to digital payments. The use of cash at point-of-sale slumped 17% last year to account for just 9% of in-store payments, and this is expected to dwindle to only 1.6% by 2024.

While credit cards remained the most popular in-store payment method (comprising 56% of transactions last year), digital wallets are the fastest-growing option and are expected to jump from 22% of transactions in 2020 to 36% by 2024.

It’s the same pattern online as well. Although credit cards lead with a 45% share, digital wallets already account for 29% of online payments and are expected to become the most popular online payment method within a few years.

The adoption of digital payments was picking up in Hong Kong even before the government’s plan to distribute vouchers via mobile wallets. As one of the world’s digital leaders, what lies ahead?

The future

A recent study of the most digitally advanced economies ranked Hong Kong in the top three. This is a position the city will look to consolidate as its residents continue to expand their use of electronic payments for shopping and other economic sectors that are just beginning to join the digital transformation.

HSBC, for example, recently announced it was integrating with a local education app to let parents make digital tuition payments to more than 1,000 schools. And ZA Bank just became the first virtual bank to receive a digital-first insurance license, which will allow customers to get quotes and make payments via a mobile app.

From investing and micro-lending to B2B transactions and cross-border ecommerce, there are many largely untapped markets for digital payments as more industries catch up to the frontrunners in retail and transport. The government is increasingly involved as well.

Hong Kong is studying the use of central bank digital currencies for both wholesale and retail transactions, while the Hong Kong Monetary Authority is working with the People’s Bank of China to test a digital yuan for cross-border payments.

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