Since Alipay in Hong Kong formed a strategic cooperation with Li Ka-shing’s CK Hutchison Holdings in September 2017, and WeChat Pay Hong Kong followed suit by enabling the credit cards processing in January 2018, the payments war has continued intensively.

By itself, CK Hutchison, a company that is owned by Li Ka-shing is a force to be reckoned with, owning significant portion of the businesses in Hong Kong – which includes real estate, utilities, telecommunications, and retail (PARK N SHOP, WATSONS, FORTRESS).

Besides the huge partnership, Alipay by itself also made headways and gained acceptance in local food markets, horse racing, and surprisingly even the worship of Wong Tai Sin.

WeChat Pay of course, refused to take the back seat in this race. Apart from generous discounts, it issued a variety of red envelopes during the recent Spring festival, which was estimated to be valued at the very least around HKD 10 million.

Pundits may compare the situation to what was happening in other parts of China, where copious amounts of cash burning takes place, and that there may be no clear winner at least for the foreseeable future. However, we contend that this time it may be different.

The Local Giant: Octopus

When it comes to the most popular item in Hong Kong, it must be the Octopus card. Octopus card, which was developed for public transportation in 1997, can (and have been for many years) be used at subways, buses, ferries, supermarkets, convenience stores, many restaurants, and even as an office or residential access card.

According to Acorn Asia’s research in 2015,  the penetration rate of Octopus card is 99% in Hong Kong, which is extremely high. Funny enough, Octopus was once branded a monopoly as it permeated the life of the Hong Kong public. However, and rather unfortunately, as of beginning of this year it may no longer be true.

Yet, we should give credit where one is due. In a bid to stay relevant, Octopus had actually launched O! ePay, a mobile payment service in 2016. Its functions are very similar to that of Alipay, including online shopping and P2P transfers. As for offline services, it also uses QR codes instead of Octopus card machine.

Octopus Application – During the Spring Festival, O! ePay also dished out discounts and red packets.

Much has been done, but it seems that even a relatively huge head-start would not save the traditional players. We raise our doubts as to whether Octopus’ efforts and preparations would amount to anything. it is very clear who has the upper hand and bigger war chests to draw from.

A market that is heating up

In 2017, Octopus’ net profit has decreased by 30.5%, partly due to the development and promotion expenses of O! ePay. On the surface level, it may have been worth the investment as the market share of O! ePay, Alipay, and Wechat Pay was 17%, 15% and 8% respectively.

Octopus App’s Rating in May 2017 (Left) and March 2018 (Right)

However, the market is proving itself to be anything but loyal. WeChat Pay saw user growth in Hong Kong that exceeded 44% in February 2018, due to the relentless promotions and offers.

Realizing this (or perhaps the lack of ideas thereof) O! ePay, Alipay and Wechat Pay, “the big three”, are all burning cash in a bid to gain more users.  It remains to be seen – what would happen when the money runs out, or will it ever run out for Tencent and Alibaba?

Mobile payments are a “hassle”

Many people in Hong Kong view mobile payments as a hassle, versus tapping a card to pay. After all, the existing payment via tapping the card is convenient enough, and they are used to it. There doesn’t seem to be any need for them spend a great deal of time learning to use another app.

While the success of WeChat Pay and Alipay in Mainland China is mainly attributed to the insatiable demand for high frequency services such as food delivery, ride-hailing, and online shopping, it is clearly not the same in Hong Kong. Its densely populated areas allow for supermarkets and restaurants to cater to many. The convenience factor created a situation where businesses and consumers mostly have no incentive to change the way they conduct business.

However, in areas such as the subway, (Octopus’s traditional turf) Alipay and WeChat Pay have already spread their tentacles.

One man’s trash is another man’s treasure

By the end of 2017, Alipay and WeChat started to make inroads, through cooperation with MTR, the operator of the Hong Kong metro.

Passengers could purchase tickets via Alipay and WeChat Pay using dedicated ticket dispensers. While It may seem like a small win, as the main passengers who use the QR code to purchase tickets are still tourists from the mainland, we view this as a strategic coup.

Let us explain why. A senior Hong Kong Police officer once shared a story with our colleague, of his experience using the Octopus to solve a criminal case. In a triad fight case, the police discovered that the bottle left by the perpetrator was bought by an Octopus card. By successfully retrieving the data of this Octopus card, they managed to confirm the identity of the perpetrator, and the police eventually caught him.

Public transport systems are indeed a treasure trove for data. Unlike its counterparts in public transportation (ride hailing, bike share etc) Octopus has yet to still develop plans to use its data to its benefit.

The future

Perhaps, 2018 could be the turning point for mobile payments in Hong Kong. It is still unclear who would emerge as the winner. However, we contend that  Alipay and WeChat stand a good chance to be big players in the market because of the following:

  • Introducing lower transaction fees for merchants

The relatively high transaction fees for Octopus and credit cards, have forced many tea restaurants, small shops, and market vendors to only accept cash payments. Alipay and Wechat could really pull a coup in this segment.

In addition, WeChat Pay and Alipay also began to offer service for taxis. It is estimated that at least 10% of the taxi drivers accept Wechat Pay.

  • Provides practical features for user convenience

Services such as personal microfinance,  cross-border transfers, and peer-to-peer transfers have created a cult following amongst many users.  According to JD Power’s research, WeChat Pay HK received the highest satisfaction rating among respondents (7.7/10), partly due to its extensive and practical features (especially the cross-border transfer between Mainland China and Hong Kong)

  • Adapting to local condition and local people’s habits

One example is stamp collection. Hong Kongers are keen on collecting stamps when shopping. This hobby is handed down from generations to generations. Realizing this, Alipay started offering discounts in similar fashion.


To sum up, the key point of this business war is not about seizing market share, nor changing the user’s habits, but to bring convenience to users. We at Momentum Works do not think the game is over yet, but as entrepreneurs ourselves, we know where this war is heading. The winner of the payment war in Hong Kong would no doubt be the one who wins over the hearts and minds of users through product convenience and practicality.

Thanks for reading The Low Down, insight and inside knowledge from the team at Momentum Works. If you’d like to get in touch with us about any issues discussed in our blog, please drop us an email at [email protected] and let us know how we can help.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].



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