2020 E-commerce Payments Trends Report: Hong Kong - JP ...

Hong Kong boasts excellent internet, smartphone and banking penetration, laying the groundwork for a thriving e-commerce market. Wenolongersupportthisbrowser.Usingasupportedbrowserwillprovideabetterexperience. Pleaseupdateyourbrowser. Closebrowsermessage ShareArticle,OpensSharingWidget. ShareonFacebook(openspop-upwindow) ShareonTwitter(openspop-upwindow) ShareonLinkedIn(openspop-upwindow) ShareviaEmail(opensemailprogram) PrintPage CloseSharingWidget E-commercePaymentsTrends 2020E-commercePaymentsTrendsReport:HongKong HongKonghasbeenslowtoadopte-commerce,butexcellentdigitalinfrastructureisdrivinguptakeinthishigh-spendingmarket. KeyTakeaways HongKongboastsexcellentinternet,smartphoneandbankingpenetration,layingthegroundworkforathrivinge-commercemarket.However,itlagsbehindmainlandChinaforuptake.Merchantsshouldhighlightthediversityoftheirproductofferingsandtheconvenienceofe-commercetoattractconsumers.    HongKonge-commerceischaracterizedbyveryhighlevelsofcross-borderspending,whichbodeswellforinternationalmerchants.Youngerdemographicsareusingsmartphonesandapp-basedsitestoaccesse-commerce.    Cardsarethemostpopularwaytopay.Bothcardanddigitalwalletpaymentfunctionsshouldbeoptimizedtocaptureasmanyshoppersaspossible.Octopusisakeylocalcardbrand.     E-commerceasapercentageoftotalretailinHongKongisrelativelylow—just7percent.1HongKongisacompact,urbanregionwithexcellenttransportinfrastructure,whichtodatehassupportedphysicalretail.  Inaddition,comparedwithothermarketsincludedinourreport,asignificantportionofthepopulationisyettomaketheirfirstonlinepurchase.Inapopulationof7.5million,fouroutof10citizensdonotusee-commerce.2  However,e-commerceuptakeisincreasing.Thisisbeingdrivenbyrisingsmartphoneuptakeandyoungergenerationsshoppingviasocialmediachannels.3  MarketplacesTaobaoandTmallandarethemostpopulare-commercesitesinHongKong.4KeymarketingeventstoknowincludeSingles’DayonNovember11,‘SummerFun’inJune–AugustandChineseNewYearinJanuary/February.5 Double-DigitGainsMaySlowinPost-COVID-19Market ViewtheTextVersion ViewInfographicVersion closeinfographicmodalbutton   HongKongbusiness-to-consumere-commercemarket  2017 2018 2019 Business-to-consumere-commercevalue(USDbillions)  3.7 4.2 4.5 Business-to-consumere-commercegrowth 14.9% 12.5% 8.5% CAGR(2018–2023) 7.8% Source:J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPLviaSociétéGénéraleandTechinAsia,eMarketer,2020. HongKong ViewtheTextVersion ViewInfographicVersion HongKonggenerateddouble-digitrisesinsalesin2017and2018,slowingin2019.6Lookingahead,growthispredictedtocontinueatacompoundannualgrowthrate(CAGR)of7.8percentto2023.7 TheaverageannualonlinespendisHKD7,248(US$925).ThisislowerthanmainlandChina(RMB9,763/US$1,463).8DuringtheCOVID-19pandemicinthefirsthalfof2020,morethanhalfofonlineshopperssaidtheyhadstartedtobuymoregroceriesandpersonalhygieneproductsonline.9 Thatsaid,HongKongmovedquicklytoimplementtrack-and-testmeasuresduringtheCOVID-19pandemic.Asaresult,infectionswerelowandtherewerefewerrestrictionsoncitizens.10Thepandemicmaynothaveaslastinganimpactone-commerceasinothernationsincludedinthisreport.   StrongSmartphoneUptakeisConduittoDouble-DigitMobileCommerceGrowth ViewtheTextVersion ViewInfographicVersion closeinfographicmodalbutton   HongKongbusiness-to-consumermobilecommercemarket 2019 2020 2021 2022 2023 Forecastofmobilecommercemarketsize(USDbillions) 2.1 2.3  2.7 3.1 3.5 CAGR(2019-2023) 13.2% Source:J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPL,2020. HongKong ViewtheTextVersion ViewInfographicVersion At91percent,HongKonghasveryhighinternetpenetration,outrankinge-commerceforerunnersChina,theU.S.andtheUK.11ThismeansinternationalmerchantscanaccessthevastmajorityofHongKong’scitizens. Smartphoneuptakeisalsohigh,at76percent.12Thishasledtoaconfidentmobilecommercegrowthpredictionof13.2percentcompoundannualgrowthrateto2023,bywhichpointitwillbeaprojectedUS$3.5billionmarket.13 5GlaunchedinHongKongin2020andisexpectedtoberolledoutacrossthecity-stateinthesecondhalfof2020.14Increasedon-the-gointernetspeedscouldfurthersupportmobilecommerce.   AnAppetiteforApps,withMobileCommerceTakingAlmostHalfofOverallMarket ViewtheTextVersion ViewInfographicVersion closeinfographicmodalbutton   HongKongbusiness-to-consumermobilecommercemarket 2019 E-commercecompletedonamobiledevice 47% Mobilecommercecompletedin-app 55% Mobilecommercecompletedonabrowser 45% Source:J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPL,2020. HongKong ViewtheTextVersion ViewInfographicVersion HongKong’smobilecommerceuptakeislowerthanmainlandChina,whichhasthehighestrateglobally(60percent).However,with47percentoftransactionscompletedviamobile,itisasignificantpartofoveralle-commerceandmerchantsshouldofferbothmobileanddesktopsites.15 Themostpopulardevicestoaccesse-commercearemobiles(49percent),desktops(33percent)andtablets(19percent).16 Appsarepreferredoverbrowserstocompletetransactions.Historically,domesticmerchantsinHongKonghavebeenslowerthantheirmainlandChinacounterpartstooffere-commerceapps—internationalmerchantscouldcapitalizebydevelopingeasy-to-useappsinresponse.17   CardsDominate,asDigitalWalletsGrowinUse ViewtheTextVersion ViewInfographicVersion closeinfographicmodalbutton Paymentmethod Paymentsplit2019 Card 40% Cash 6% Banktransfer 15% Digitalwallet 36% Other 2%   PaymentMethod Forecastedpaymentsplit2023 Card 34% Cash 1% Banktransfer 16% Digitalwallet 47% Other 1% Source:J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPL,2020. HongKong ViewtheTextVersion ViewInfographicVersion CardsarethemostutilizedpaymentmethodforHongKonge-commerce,usedin40percentofalltransactions.18Creditcardsareinhighuse,with2.62creditcardspercapita,comparedtojust0.82debitcards.19 TheubiquityofOctopus,alocalcard-basedpaymentmethodoriginallydevisedfortransitpaymentsbutnowenabledforonlinepayments,willsupportongoingcarduse.Thecardhasalmosttotalpenetration:95percentofthepopulationagedbetween16and65usethecard.20 Digitalwalletsarethesecond-mostpopularpaymentmethod,taking36percentofonlinetransactions.21Thismethodisrisinginuse.China’sAlipayandUnionPayarekeybrandsandallowcardintegration.   Cross-BorderSpendingOutranksDomesticE-commerceSpend  ViewtheTextVersion ViewInfographicVersion closeinfographicmodalbutton Indicator First Second Third Topcross-bordershoppingoriginmarkets China Singapore Japan Originmarket'scurrency RMB SGD JPY Source:J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPL. HongKong ViewtheTextVersion ViewInfographicVersion Cross-borderspendingishighandakeyelementofHongKonge-commerce,taking70percentoftheoveralle-commercemarket.OwingtoHongKong’ssmalldomestice-commercemarket,75percentofonlineshoppershavealreadyshoppedcross-border.22 China,SingaporeandJapanarethemostpopularcross-borderdestinations,offeringrelativeproximityandahugerangeofgoods.23 HongKongcansupportincreasingamountsofcross-bordertrade.Itranks12thintheWorldBank’sglobalrankingoflogisticscapabilitiesandquality,oneofthehighestrankingsoftheinternationalcountriesincludedinourreport.24   HongKongAdoptsRevisedPaymentServicesDirective-styleRegulations Regulation/trendsTheHongKongMonetaryAuthorityhascloselyfollowedEurope’srevisedPaymentServicesDirectiveasatemplatetoupdateitsonlinebankingregulations.TheauthoritylauncheditsopenapplicationprogramminginterfaceframeworkinJanuary2019,whichisbeinglaunchedinphases.25 Barriersorbenefitstoe-commercemarketentryDeliverycostscanbehigherthaninothermarkets.Withmanyconsumersbeingbusyorworkingoutsidethehome,firsttimehomedeliveryoftenfails,increasingcosts.26 Nolocalentityisrequired.Therearenocurrencyorforeignexchangecontrols.27 FactorsdrivingthecostofpaymentacceptanceAcceptancefeesvary.PayPal™andUnionPay,forexample,havehigherfeesthanAlipay(0.55percentoftransactionvalue).28   J.P.Morganhasanalyzed34e-commerce marketstodecipherthetrendsandchallengesdrivingglobale-commercein2020.Toaccessourinsightsonacountry-by-countrybasis,clickhere.     1.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyviaXinhua,2019. 2.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyviaSociétéGénérale,2019. 3.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyviatheHongKongGeneralChamberofCommerceandCompassOffices,2019. 4.similarweb.com,July2020.‘Topsitesrankingfor e-commerceandshopping in HongKong.’AccessedJuly2020.  5.tripsavvy.com,March2020.‘WhenaretheHongKongshoppingsales?’AccessedJuly2020.  6.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPLviaSociétéGénéraleandTechinAsia,eMarketer,2020. 7.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPL,2020. 8.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&Company,2020. 9.statista.com,June2020.‘Popularproductsone-commercesitesduringcoronaviruspandemicinHongKong2020.’AccessedJuly2020. 10.theguardian.com,April2020.‘Testandtrace:lessonsfromHongKongonavoidingacoronaviruslockdown.’AccessedJuly2020.  11.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyviaWorldBank,2019. 12.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyviaStatista,2019. 13.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPL,2020. 14.marketing-interactive.com,July2020.‘Thefastandcurious:DifferentapproachesHKbrandsaretakingtowinthe5Grace.’AccessedJuly2020.  15.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPL,2020. 16.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyviaRakuten,2020. 17.retailNews.asia,May2018.‘GoogleexplainsHongKong’sE-commerceChallenges.’AccessedJuly2020. 18.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPL,2020. 19.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyviatheHongKongMonetaryFund,2020. 20.octopus.com.hk,2020.‘Ourservices–HongKong.’AccessedJuly2020.  21.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPL,2020. 22.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyviaPayPalCrossBorderConsumerResearch,2018. 23.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyandWPL,2020. 24.worldBank.org,2020.‘InternationalLPI:GlobalRankings2018.’AccessedJuly2020. 25.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyviaPYMNTS,2019. 26.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyviaHKTDCResearch,2017. 27.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&Company,2020. 28.J.P.Morgan2020E-commercePaymentsTrendsReport:DatahasbeenprovidedtoJ.P.MorganbyEdgar,Dunn&CompanyviaPayPal,China-EcommerceandChinaUnionPay,2020,2017,2020. 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