Hong Kong

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Payments

Domestic and Preferred Card Schemes

TBD

Alternative Payment Methods

Electronic Wallets are internet-based applications built by e-wallet providers on top of traditional payment options such as card payments and bank transfers. Consumers pre-register an account, which stores payment details based on their preferred funding source. These e-wallet providers act as a trusted intermediary – both by consumers and merchants – for storing payment information and facilitating ease of checkout between buyers and sellers. Leaders in this area are internet giants such as PayPal, Google Wallet and Checkout by Amazon.[1]

Other Payment Methods

An escrow payment is a financial arrangement where a third party (escrow payment provider) holds and regulates payment of the funds required for two parties involved in a given transaction. It helps to make transactions safer by keeping the payment in a secure escrow account, and only releasing funds after the receipt of goods or services is deemed satisfactory. Escrow payment providers act as trusted intermediaries, reducing the risk of fraud for merchants and providing assurance for consumers.

Escrow payments are particularly useful in the case of online transactions as both the buyer and seller are subject to risks of fraud. When the payment is kept by the escrow payment provider, the online transaction can be safely carried out without risk of losing money or merchandise due to fraud. In China, AliPay provides escrow payment for transactions on Alibaba’s platforms. In the rest of the world, the most popular provider of escrow payment is PayPal, which secures transactions on eBay.[2]

Digital Invoicing

TBD

Customer Experience

TBD

Payments Regulation

As a financial hub with well-established rules and regulations in compliance with the rest of the world, as well as similarities in language and culture to many Asian countries, Hong Kong has an unrivalled position as a provider of payment-aggregation services to bridge China and other countries, as overseas merchants normally find it challenging to set up the infrastructure to accept online payment from mainland consumers.[3]

Local entities

mPay is one of the payment-service providers in Hong Kong that provides aggregation services. By collaborations with Visa and Mastercard (through acquiring banks), UnionPay, Alipay, WeChat Pay, Octopus Online and PPS, mPay enables any online merchants, who have registered a company in Hong Kong, to accept transactions from consumers in Hong Kong, the Chinese mainland and other countries. With mPay’s one-stop secure online payment service – which supports multi-delivery channels and multi-currencies – e-commerce websites or mobile apps worldwide can open for business without the hassle of dealing with multiple financial institutions and various payment methods in different markets. To overseas merchants, registering a company in Hong Kong is much easier than setting up the infrastructure to accept online payment from mainland consumers.

China Smartpay, another payment aggregator in Hong Kong that possesses a nationwide prepaid card licence and internet payment licence from China, enables Hong Kong merchants to conduct cross-border RMB exchange for their online transactions on the mainland. To complete an online transaction, a mainland online shopper can choose any payment gateways to settle the payment. After the transaction is verified, the payment will be transferred to China Smartpay’s mainland account and then to the merchants’ account in Hong Kong (via China Smartpay’s account in Hong Kong). Without leaving their offices, the online merchants in Hong Kong can receive the payment from the mainland buyers in their preferred currency.[4]

Mobile payments

Mobile payments are extensions of e-wallets, with mobile-specific features and services, and have become increasingly popular in line with the proliferation of mobile devices. Due to their input and interface simplicity, e-wallets provide convenience for mobile checkouts. PayPal and Google Wallet offer mobile versions in the form of apps for mobile-optimised e-commerce sites. These payment options allow consumers to manage their e-wallets on the go and make payments with their mobile devices at traditional brick-and-mortar stores. Coming full circle, these mobile payments enable secure cashless transactions in the offline domain.

However, the adoption of mobile-payment services in Hong Kong has lagged behind other markets, notably the Chinese mainland. Banks and other financial institutions, however, are looking forward to changes in Hong Kong consumers’ payment behaviour following the aggressive launch of Apple Pay and other payment innovations. Products developed by wireless-network operators such as Hong Kong Telecommunications and SmartTone Telecommunications have also joined the mobile-payment battlefield. The Hong Kong market may finally be ripe for more advanced mobile-payment products.[5]

Logistics

While the room for expansion of traditional exports in Hong Kong is limited, the proliferation of e-commerce in many sectors opens another window of opportunity for the logistics industry. Indeed, the explosion of international e-commerce is driving suppliers to revisit their sourcing and distribution decisions, creating an urgency to reshape the whole supply chain. Key logistics processes are becoming more customer-centric, with key data being shared by supply chain partners. When it comes to selling products via online platforms, small and medium enterprises (SMEs) in Hong Kong continue to face obstacles posed by the fragmentation of orders and the complexity of global logistics. 3PL providers with an international network, and innovative and customer-friendly solutions, can help SMEs narrow the gap with e-commerce giants.[6]

Infrastructure

Hong Kong is the top largest air cargo hubs, and the 4th biggest container port. The port provides 70 shipping lines, over 350 container line services per week and covers more than 510 destinations around the world.[7]

Fast delivery and real-time parcel tracking have become essential in maintaining export competitiveness in the digital era. However, mounting online sales that stretch in-house resources have forced online merchants to look for e-logistics solutions tailored to the fast pace of e-commerce. 3PL providers with a streamlined infrastructure and high scalability to handle inventory, fulfilment, shipping and returns are in great demand as e-commerce continues to grow at a rapid rate.

When e-commerce businesses succeed, they often take off faster than those with traditional business models, and the need for logistics services can suddenly become overwhelming. Efficiency of goods delivery is one of the main components that have a bearing on customer satisfaction in the competitive e-commerce arena. For the overseas markets they serve, logistics service providers must expand their domestic distribution capabilities to offer efficient last-mile delivery. Those that are committed to building distribution networks and delivery fleets are more likely to gain a firm foothold and achieve high margins in tomorrow’s logistics industry.[8]

Import Duties

Hong Kong is a free port and does not levy any duty on imports (or exports). There is also no sales tax or other import charges. Excise duties are levied only on four types of dutiable commodities, namely liquors, tobacco, hydrocarbon oil and methyl alcohol.[9]

Marketing

Over 80% consumer shop online through desktop computers, while two-out-of-five online shoppers choose their smartphone for e-shopping.[10]

Shoppers

Generally speaking, 88% of Hong Kong consumers shopped online in the past 12 months. The young generation (aged below 30) are all active e-shoppers, while one-third of the e-shoppers in Hong Kong purchased online within one week.[11]

Social Media

Hong Kong businesses are taking advantage of social media as a means of outreach. Here’s a list of the top social networks in Hong Kong based on how companies are using them to develop their communities: Facebook, WhatsApp, Weibo, WeChat.[12]

Major shopping categories

In Hong Kong, the top five categories of internet retailing are consumer electronics (31.4%), media products (18.4%), personal accessories and eyewear (15.5%), apparel and footwear (12.7%), and food and drink (6.7%). In the next five years, food and drink is expected to see the strongest growth among the major categories, at an annual rate of 11%.[13]

Major retail holidays

China’s Singles Day, the world’s biggest shopping day — an annual Nov. 11 commercial extravaganza in which Chinese consumers spend big on discounted merchandise online.[14]

Legal / Regulatory

Hong Kong Government enacted the Electronic Transactions Ordinance to provide a clear legal framework for the conduct of e-business in the Hong Kong Special Administrative Region.[15]

FX Policies

The monetary policy objective of Hong Kong is currency stability, defined as a stable external exchange value of the currency of Hong Kong, in terms of its exchange rate in the foreign exchange market against the US dollar, at around HK$7.80 to US$1. The structure of the monetary system is characterised by Currency Board arrangements, requiring the Hong Kong dollar Monetary Base to be at least 100 per cent backed by, and changes in it to be 100 per cent matched by corresponding changes in, US dollar reserves held in the Exchange Fund at the fixed exchange rate of HK$7.80 to US$1.[16]

Technology

Google's Consumer Barometer also reflects a high level of mobile internet usage in Hong Kong. It found that 48% of internet users in the special administrative region used smartphones more often than computers or tablets to access the internet. Data consumption by mobile phone users continues to grow, although it appears to be slowing. The Office of the Communications Authority (OFCA)—Hong Kong found that mobile connections in Hong Kong used an average of 1.46 GB of mobile data in September 2016, up from 1.35 GB in December 2015. Despite those increases, mobile internet users still rely heavily on Wi-Fi for online access. Vpon found that 63.5% of mobile network traffic flowed over Wi-Fi, with just 36.5% traveling via a mobile network. From the OFCA, Mobile users are still largely on slower 3G networks, according to the OFCA, although 4G connections 3 4G connections in Hong Kong as of September 2016, compared with 7.17 million 4G connections. GSMA predicts the percentage of 4G mobile connections will rise to 71% by 2020, giving 4G in Hong Kong a similar penetration rate to China's 73% that year.[17]

Security

The Hong Kong Securities and Futures Commission’s recent proposals on mitigating hacking risks in the securities industry are aimed at an upswing in cybersecurity incidents in internet trading systems in Hong Kong. The commission proposals include two-factor authentication for clients’ system login and prompt notification informing clients of certain activities in their internet trading accounts, the SFC said in a statement. The Hong Kong commission proposed expanding the scope of cybersecurity-related regulatory principles and requirements to cover online trading of securities that aren’t listed or traded on an exchange. It also seeks to clarify that an internet-based trading facility may be accessed through a computer, mobile phone or other electronic device.[18]

Mobile appetite

Hong Kong is one of the most smartphone-friendly markets in the world. Nearly seven in 10 (69.8%) of the special administrative region's population will count as smartphone users in 2016, according to eMarketer forecasts. While the penetration rate is high, the overall number of smartphone users is comparatively low for an Asia-Pacific market at just 5 million, given Hong Kong's smaller population. Among these smartphone users, Android is the preferred operating system across genders and age groups, according to data from geolocation platform Near. A study of smartphone users in Hong Kong conducted by the company in Q2 2016 found that Apple made its strongest showing among 18- to 25-year-olds, 37% of whom used iPhones. That compared with just 24% of 36- to 45-year-olds on the Apple devices.[19]

References

  1. HKTDC "Hong Kong Means Business"
  2. HKTDC "Hong Kong Means Business"
  3. HKTDC "Hong Kong Means Business"
  4. HKTDC "Hong Kong Means Business"
  5. HKTDC "Hong Kong Means Business"
  6. HKTDC "Hong Kong Means Business"
  7. Start Ups HK "5 Hong Kong Logistics Startups to Keep an Eye On in 2017"
  8. HKTDC "Hong Kong Means Business"
  9. Pitney Bowes "Duty Calculator Hong Kong"
  10. Nielsen "Things You Should Know about Hong Kong Online Shoppers"
  11. Nielsen "Things You Should Know about Hong Kong Online Shoppers"
  12. ClickZ "An Introduction to Social Media in Hong Kong"
  13. HKTDC "Hong Kong's E-commerce Ecology"
  14. The LA Times "China's version of Black Friday - the world's biggest shopping day"
  15. GovHK "GovHK E-commerce"
  16. Hong Kong Monetary Authority "Monetary Stability"
  17. eMarketer "Nearly Seven in 10 Hong Kong Residents Use Smartphones"
  18. Bloomberg "Cybersecurity Rules Proposed for Hong Kong Securities Industry"
  19. eMarketer "Nearly Seven in 10 Hong Kong Residents Use Smartphones"