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 retail payment
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
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$12.8 billion in the same period.
However, there is very limited usage of
Octopus across the border in the Chinese mainland, as it is
accepted at only 11 fast food outlets in Shenzhen and 4 duty-free
shops in Lowu and Huanggang. It also competes with 11 other
mainland transport card schemes, all of which run on different
The HKMA plans to significantly expand the
retail payment usage of Octopus in order that it becomes a form of
e-money in Hong Kong. Octopus has three roles: a settlement
platform operator; card issuer; and merchant acquirer.
To introduce competition, access to the
settlement platform will be made available to other bankcard
issuers; currently there are two Hong Kong banks which issue bank
cards incorporating the Octopus function.
Number of cards (m)
Number of daily transactions processed
Value of daily transactions (HK$m)
Average value of public transport transaction
Average value of retail spending
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.