Hong Kong: is cash still king?
Hong Kong’s love affair with cash is a difficult one to shake off. And while it may no longer be entirely ‘king’, it certainly retains the status of at least a dearly loved but ageing monarch.
Back in November 2020, many eyebrows were raised towards Hong Kong when the Special Administrative Region’s Chief Executive, Carrie Lam, reportedly declared that she had taken to receiving her salary in cash, following US sanctions that resulted in her not having access to a bank account.
Though the size of the salary paid to one of the most highly remunerated leaders on the world stage may have been of interest to some, it seemed most curiously normal that cash was the most acceptable alternative for Lam.
While the Chinese mainland forges ahead with a payment culture now so embedded that some are describing it as ‘beyond cashless’, the use of hard cash in Hong Kong shows much slower signs of declining.
But is this more than a fear of technology or big data taking over? The evidence indicates that Hongkongers are demonstrably comfortable with internet banking, credit/debit cards are an accepted part of consumer life, and Chinese giants WeChat and Alipay have both made good ground in the territory’s smart payments market.
That said, even the popularity of the 24-year-old Octopus Card – one of the world’s earliest contactless electronic payment cards, and used by 95% of Hong Kong’s population for public transport and at retail outlets, restaurants and convenience stores – has not killed off cash.
A recent survey to establish payments habits among Hongkongers, the AliPay HK Smart payment Popularity Index, in fact concluded that a combination of retailers and consumers’ fears around smart payments such as with mobile or smart watches, did seem to slow progress to digitalised transactions. Fifty-six percent of retailers felt there wasn’t enough demand from their customers, while 69% of customers were not sufficiently familiar with how to use smart payments. And 53% of customers were happy to stick with current payment methods.
Philip Kam, General Manager at the Hong Kong Institute of Bankers, says: “The reason why people like cash here is that they simply like the tangible feel of money. And particularly around the time of Chinese New Year, one of the traditions is for people to give lucky money in a neat, red packet. Getting crisp, new bills is so special that the banks deliberately launch new runs at this time of year to meet demand.
"But there is also a level of trust in cash that mainland China does not have so much – where for example, they cancel old notes quickly without accepting them for exchange at banks.”
Reluctance to change may also be due to an ageing population that has grown up with the well-established trading culture that defined the territory’s way of life for centuries. For others, the pace of digitisation that can be seen in mainland China could also ignite concerns about growing cross-border influence that its people would rather avoid as a way of demonstrating their distinctive status.
In truth, increased cross-border collaboration was always going to be a feature of Hong Kong’s post-colonial rule and the financial sector is no exception. Millennial and Generation Z consumers are already deepening their relationship with a cashless lifestyle, and in October 2018, WeChat Pay HK expanded its functionality to enable the territory’s citizens to purchase in China and settle in HK$.
This is just another move to create convenience which – within time – will woo Hong Kong away from its continuing obsession with cash.
Read about Hong Kong’s economic and financial influence on page 36 of the Winter 2021 issue of Chartered Banker magazine.