How a pandemic is igniting Hong Kong’s digital economy
Hong Kong has been considered an emerging digital powerhouse thanks to its growing technology capabilities, digital advances, and innovative breakthroughs.
The unprecedented growth of its technological means has helped position the city’s digital economy as one of the most progressive in the Asia Pacific – but its e-commerce and e-payment markets are yet to truly flourish like those of neighbouring Singapore and Indonesia.
Interestingly, Hong Kong is saturated with a wide range of physical retailers and services which can be easily accessed and, as such, its citizens haven’t surged online to buy their goods like many other parts of APAC.
However, with the current pandemic forcing would-be shoppers indoors, while those venturing out for groceries are exercising extra caution, both Hong Kong’s e-payments and e-commerce sectors are benefiting – as well as the last-mile logistics market that supports the latter.
Digital wallet transactions in Hong Kong are expected to grow at a compound annual rate of 32 percent by 2021, according to JP Morgan.
One of its major e-payment provider, Octopus Cards, reported seeing significant growth in transactions over the first two months of the year – right when the outbreak started – with mobile wallet transactions bumping up 20 percent in January and 30 percent in February.
The company told Straits Times, “In view of the change in customers’ and merchants’ view in avoiding the handling of banknotes amid the coronavirus outbreak, the trend is expected to continue in the coming months.”
Nevertheless, with a rapidly growing demand, new players are expected to enter the arena, catalyzing not only market competition, but also the growth of digital payment capabilities.
As more consumers turn to e-wallet and e-payment technologies, more retailers will also make the shift to the e-commerce market to keep business flowing in.
Bricks-and-mortar stores are more than keen to offer their products and services online in a bid to maintain operations, foster new growth, and meet consumer demand. Shopping malls are also helping out renting retailers to continue their business by setting up e-commerce channels.
Additionally, traditional food and beverage (F&B) companies are also making the jump now that the government has restricted dine-ins. Since consumers can no longer go to them, these companies are making sure that they can go to the consumers instead.
This shift has not only resulted in the growth of online to offline service platforms, but it has also fueled the growth of last-mile delivery services.
The boom in demand for online food and grocery deliveries is generating a spike in business for logistics firms. These service providers typically collaborate with e-commerce retailers ranging from restaurants to grocery marts to help deliver items to consumers quickly and instantly.
Last-mile delivery companies either provide the delivery service for e-commerce retailers or they provide the online marketplace platforms for retailers to host their businesses.
Either way, the market has contributed to Hong Kong’s gig economy and has helped mobilize businesses since consumers can no longer leave their homes easily.
The combination of the three makes a powerful recipe for the city’s digital economy growth and sustainability – and will arguably catalyze a continued surge towards the benefits of new payment tech and the platform economy.
Although the current movement restriction orders will likely be lifted in the next couple of months, the preference for digital services is expected to continue as citizens adapt to these new means.
At the same time, to support the surge in online activities and ensure businesses scale up their operations effectively, the city is expected to expand its network capabilities through 5G and cloud facilities.