Mainland Tech Giants Race to Ride the HK Metro

Metro riders in Hong Kong will soon have more options for using smartphones to pay fares as mainland tech giants compete to expand use of their payment services in the Special Administrative Region.

By mid-2021, Hong Kong passengers will be able to use the WeChat messaging app to pay metro fares. The Hong Kong unit of WeChat, backed by Tencent Holdings, agreed to a partnership with MTR Corp., the metro operator, according to an announcement Wednesday.

Less than a week ago, Ant Financial Services, backed by Tencent’s archrival Alibaba Group Holding Ltd, unveiled a similar partnership with MTR. Ant Financial will provide smartphone payments at 91 MTR stations across the city by mid-2020 through its subsidiary Alipay HK, a venture between Ant Financial and Hong Kong tycoon Li Ka-shing’s CK Hutchison Holdings.

Tencent and Alibaba have ramped up competition in public transport as a new frontier in the battle for users. Both companies have launched services for urban commuters in dozens of mainland cities since last year, allowing them to make payments for bus, metro and railway rides via mobile phones. Smaller rivals are joining in.

Public transportation is considered the last “blue ocean” market for the mobile payment industry. According to industry estimates, 300 million trips are taken on public transportation across China on an average day. In Hong Kong, the MTR and Airport Express networks carry an average of about 5.8 million passenger trips a day.

While financial terms of the transit companies’ agreements with the payment services haven’t been disclosed, commuters offer a vast pool of potential app users that WeChat, Alipay and others can court for expanding their business ecosystems.

The new MTR services will allow users of WeChat or Alipay in Hong Kong to scan a QR code — a black-and-white barcode — on their smartphone screens at entry-gate readers, completing the transactions in less than a second. This method will be an alternative to Hong Kong’s iconic Octopus card — a rechargeable smart card that’s accepted in the public transportation network and at many retail outlets.

Alipay HK will also allow mainland users to link their yuan-dominated Alipay accounts to use services in Hong Kong, according to the South China Morning Post.

Tencent’s QR code payment services for public transport cover 100 mainland cities and 50 million people, the company said recently. Alipay said its services have expanded to 120 Chinese cities.

Smaller rivals are expanding similar services. In August, Suning Payment, a mobile payment service run by e-commerce company Suning Holdings, said it would be the first mobile payment method offered to commuters on the subway system of Nanjing, the capital of east China’s Jiangsu province. State-backed UnionPay has also joined the competition by launching mobile payment services for passengers in cities like Guangzhou and Hangzhou.

Alipay and Tencent started testing the waters of Hong Kong’s public transport market last year while expanding their presence in the city’s grocery stores and other retail venues. Mobile payment in Hong Kong has not been as prevalent as on the mainland. In December 2017, WeChat Pay HK and MTR launched a trial program at two metro station allowing commuters and tourists to buy tickets with the WeChat app.

Alipay HK teamed up with two green minibus operators in the city allowing passengers to pay fares with QR scans. WeChat and Alipay have also introduced their payment services to Hong Kong taxis.

Alipay HK said in August that its users have jumped 50% to 1.5 million since March. WeChat Pay HK didn't disclose its user totals in Hong Kong.

Contact reporter Han Wei (weihan@caixin.com)