View all newsletters
Receive our newsletter – data, insights and analysis delivered to you
  1. News
February 10, 2010

Hong Kong and China plan cross-border e-money scheme

The Hong Kong Monetary Authority (HKMA) is planning a cross-border e-money scheme with China, which will encompass an electronic funds transfer at the point of sale framework for transit and small value payments. At the core of the project is the creation of a multifunction prepaid card that would incorporate Hong Kongs massively successful Octopus transit application and the Shenzhen Tong transport card.

By Verdict Staff

The Hong Kong Monetary Authority (HKMA) is planning a cross-border e-money scheme with China, which will encompass an electronic funds transfer at the point of sale framework for transit and small value payments.

At the core of the project is the creation of a multifunction prepaid card that would incorporate Hong Kong’s massively successful Octopus transit application and the Shenzhen Tong transport card.

The plans were revealed by HKMA head Norman Chan at a summit in the region at the end of January.

Once cards are developed and launched, the scheme would then develop a common card reader for the acceptance of e-money in Shenzhen and Hong Kong.

Chan said the new cards, which are also capable of handling multi-currency conversion across the border of Hong Kong and China, would be circulating within a year.

The scheme will be implemented in the Pearl River Delta region which covers Hong Kong, Macau and nine municipalities of the Guangdong Province in mainland China.

The area covers over 55,800 square kilometres, with a population of 55.28 million. The GDP of the region was $673.2 billion and GDP per capita was $12,178 as of 2008.

Octopus

Octopus retail payment expands

The project is the latest effort to expand the usage of the Octopus proposition, which is used extensively in Hong Kong for public transport and in merchant locations.

There are approximately 56,000 Octopus readers covering 3,000 service providers in Hong Kong, and the value of Octopus transactions exceeds HK$90 million ($11.58 million) per day.

The proportion of non-transport Octopus card transactions has increased from six percent in 2002 to 36 percent in 2009, while the value of non-transport transactions rose from HK$1.1 billion to HK$12.8 billion in the same period.

However, there is very limited usage of Octopus across the border in the Chinese mainland, as it is accepted at only 11 fast food outlets in Shenzhen and 4 duty-free shops in Lowu and Huanggang. It also competes with 11 other mainland transport card schemes, all of which run on different technology platforms.

The HKMA plans to significantly expand the retail payment usage of Octopus in order that it becomes a form of e-money in Hong Kong. Octopus has three roles: a settlement platform operator; card issuer; and merchant acquirer.

To introduce competition, access to the settlement platform will be made available to other bankcard issuers; currently there are two Hong Kong banks which issue bank cards incorporating the Octopus function.

Octopus

Statistics, 2009

Number of cards (m)

20

Number of daily transactions processed (m)

10

Value of daily transactions (HK$m)

90

Average value of public transport transaction (HK$)

7

Average value of retail spending transaction (HK$)

22

Source: Hong Kong Monetary Authority

The HKMA also plans to open up the merchant acquiring business. In addition to Octopus Cards, there are currently 12 merchant acquirers.

Chan stated that expanding the use and access of e-money is a crucial component for the future development of the region’s financial infrastructure. He added that relevant parties in Shenzhen and Hong Kong have already begun discussions on the implementation of the project.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A weekly roundup of the latest news and analysis, sent every Wednesday.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Electronic Payments International