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As tourist footfall recovers, the central banks of Hong Kong and Thailand are looking to link faster payment systems, while nurturing new cost-reduction measures for merchants and consumers.
The Hong Kong Monetary Authority (HKMA) has revealed that it is currently working with the Bank of Thailand (BOT) to export its Faster Payments System (FPS) to the Southeast Asian tourist hotspot.
In a new speech, a top official said the HKMA is exploring a bilateral arrangement that would allow Hong Kong tourists to use FPS in Thailand, while Thai tourists would be able to use PromptPay, their local equivalent, in Hong Kong.
“We hope that as the pandemic eases and tourism gradually recovers, we can provide one more safe and fast payment option for Hong Kong people travelling or overseas visitors coming to Hong Kong,” said Howard Lee, deputy chief executive at the HKMA.
“This cooperation will also pave the way for us to further expand the reach of our cross-border payment service in the future.”
In the five years prior to 2019, an average of almost 900,000 Hong Kong nationals visited Thailand each year, according to Thailand’s official data.
During the same period, an average of more than 500,000 Thai nationals visited Hong Kong each year.
The footfall between the countries slowed to a trickle during the COVID-19 pandemic, as travel restrictions and quarantine arrangements shut off or deterred would-be arrivals.
However, tourists are gradually returning as both countries ease these restrictions.
FPS anniversary marks user growth milestone
Lee revealed the collaboration in a speech delivered to mark the fourth anniversary of the launch of Hong Kong’s FPS.
FPS is an instant payments platform that allows registered users to transfer money between different bank accounts with the use of a simple identifier, such as a phone number.
The total number of registrations on FPS reached 10.9m as of August 2022, a significant number given the country’s 7.5m population.
As Lee points out, users can register with more than one account proxy (e.g. they can use a mobile phone number and an email address to register) and they can link to more than one bank account.
With this being so, it is unclear how many unique users are currently using FPS.
Nonetheless, like Thailand’s Promptpay service, FPS has quickly established itself as an important and fast-growing payments option.
Based on current growth rates, VIXIO expects Hong Kong’s FPS to reach over 400m transactions in 2022, representing roughly 54 transactions per capita.
Despite this impressive start, there is still significant growth potential for the service.
By comparison, VIXIO estimates that Promptpay, which launched nearly two years before FPS, will reach over 16bn transactions in 2022 — equivalent to 235 transactions per capita.
The big difference between the two markets is that, unlike Thailand, Hong Kong has a large and well-established cards market competing for consumer attention.
The significance of this is that FPS has so far struggled to attract usage among some key high-volume use cases, such as in-store and online payments.
Merchant acceptance
Lee said that the nature of FPS use has expanded over time, from small-value person-to-person transfers to larger bank transfers, payments for services and topping up e-money wallets.
Over 80 percent of Hong Kong government departments now offer FPS as a payment option, and more public services will be included in the future.
Many of these government departments — such as Hong Kong Housing Authority and Hong Kong Hospital Authority — have also adopted the FPS QR code standard.
Other use cases include utility bill payments, school fee payments and the use of FPS by securities firms as an option for clients to top-up the cash balance in their trading accounts.
While merchants across a broad spectrum of business sectors have adopted FPS to collect payments, including through direct debits, usage among consumers for everyday retail purchases is low.
The HKMA says it will focus on improving merchant uptake of FPS by reducing their operating costs.
“We have been in close dialogues with banks and stored value facilities (SVF) operators, encouraging them to develop low-cost, efficient and user-friendly FPS solutions for small retailers to collect payments,” said Lee.
“We understand that some banks and SVF operators have already launched or are planning to launch simple and low-cost payment solutions, such as FPS QR codes, to make payment collection more convenient, doing away with any cash exchange.”
Lee said these banks and SVF operators have “substantially reduced” or “waived” for merchant clients, helping to drive FPS adoption among small retailers and family-run shops.
In view of the increasing demand for online payments made by mobile phones, FPS has also launched two new payment functions designed to make it easier for merchants to accept payments online.
However, encouraging consumers to adopt FPS for merchant payments may be more of a challenge.
In Hong Kong, credit card payments are particularly popular at the point of sale, supported by generous rewards and loyalty programmes.
Given the low-cost nature of FPS, it will be difficult to see to what extent banks and merchants would be able to offer similar incentives.
Nevertheless, the payment linkage with Thailand, similar to other initiatives in the region, could play an important and dual role in both encouraging merchant acceptance to this new breed of low-cost payment option (expanding acceptance to foreign tourists), as well as increasing the value of FPS to local consumers, particularly those that travel in the region.
