Is Hong Kong's Octopus Card a Model for Mumbai?
I am in Hong Kong attending the Rise 2018 summit. This is the first time I walked out of the Hong Kong airport and my expectations of this city were based merely on what I had heard about Hong Kong from the people who live here. Little did I know that I was in a for a surprise.
The first thing that I noted about Hong Kong is the lack of digital penetration when it comes to modes of payment i.e. digital wallets, debit cards and credit cards are useless here as Hong Kong thrives on cash as a medium of exchange. My first experience with the lack of digital options started when I tried to get into a cab from the airport to go to my hotel but was denied service as I did not have any Hong Kong dollars on me. I had to go back to the ATM inside the airport so that I could pay the cab service.
Another incident took place when I was trying to buy some groceries from a store at the MTR station and the store didn’t accept any of my cards. The experience at the bakery a few doors down wasn’t any different. It was a surreal experience considering how deep the digital payment players have penetrated the Chinese and Indian lifestyles and since Hong Kong is supposed to be the gateway to investing in or out of China I just expected digital payments to be universally accepted here. In fact, this peculiarity stumps even the local expats, especially those that often visit China and I think it is a phenomenon worth further investigation.
While I spot an opportunity for a smart founding team to penetrate the Hong Kong payments market, they could face fierce competition from a local closed loop card called the Octopus card. This closed loop card is just like London’s Oyster card or Delhi Metro Smart Card in that, it allows the user to deposit money to utilise the public transportation infrastructure. However, the interesting thing about the Octopus card is that it is an acceptable mode of payment at most pay points that did not accept digital payment mediums. Take for example this morning, I ordered an amazing breakfast smoothie at the local breakfast place, the cashier would not take my credit card but they had a reader to accept the Octopus card. I found the experience weird and brilliant at the same time.
It made me think of creating a similar closed loop payment ecosystem in an Indian metropolis like Mumbai or Delhi. A payment card could be used to access the public transport infrastructure, pay at stores, maybe even pay tolls etc. The card (like the Octopus card) should be partly owned by the local government so that there is a strong trust with the consumer as well as the merchants accepting the card. To ensure a seamless experience, the card will require an able tech team, an ambitious entrepreneurial team and a strong network infrastructure.
However, the transaction data, the fees from merchants and interest from the balances on the cards could create solid revenue streams. Introduce the ability for banks, P2P lenders and NBFCs to provide the consumer & the merchant credit based on the transactional data and it is a serious business!