A recent report by Visa has cast a fascinating light on the potential for a cashless society in the short to medium-term. The Hong Kong report looked at both payment methods available at the moment (and going forward) and the actions of consumers. While many people believe that governments worldwide are pushing consumers into a cashless society, it looks as though consumers are making up their own minds!


Abandoning online transactions


There are many startling facts in the report, one of which is the claim that one in three consumers would abandon a purchase if digital payment wasn’t available. We know that most large retailers and businesses across the Far East focus on digital payments, but where do small to medium-sized enterprises (SMEs) stand?


At this moment in time, it is estimated that around 95% of SMEs will incorporate digital payment into their payment systems in 2022. However, this suggests that 5% of SMEs will remain committed to cash transactions no matter what. Whether they eventually decide to switch to digital paymentsremains to be seen, but there is the potential to lose significant revenue.


Cost of upgrading


Considering that a digital transaction will incur a processing cost of between 1% and 5%, it is no surprise that small companies have been reluctant to give up this revenue. These are companies which are not benefiting from economies ofscale associated with huge online operations and largeconglomerates. There is also the cost of point-of-sale (POS) systems, which, to be fair, has fallen in recent times but can still be a relatively high one-off expenditure.


While selling their goods and services via third-party digital websites is an option, additional fees/commissions would eat away/destroy profit margins. So, while it appears that some businesses are reluctant to "move with the times", on closer inspection, many of them may not be able to afford such a move. The alternative is to increase the cost of goods/services, to make up for additional third-party charges, but this is likely to make the company uncompetitive and negatively impact sales. Where do they go from here? Is it time to bite the digital bullet?


Popular digital platforms


It will be no surprise to learn that 50% of online shoppers in Hong Kong use a mobile app, 23% browser on a computer and 16% use a web browser on a mobile. This perfectly illustrates why technology shares have been popular in recent years, especially those involved in e-commerce. 


Interestingly, it is now possible to buy a relatively cheap mobile phone POS device, allowing you to take digital payments on the move. While this may be an option for many small businesses, again, there is a need to appreciate the set-up cost and processing charges.


The high-tech sector in demand


Whether looking at FinTech, Regtech or Insurtech there is no doubt that the technology revolution is rolling on. This comes at a time when Hong Kong authorities are looking to increase the number of technology companies quoted on the stock exchange. The Chinese authorities have also tweaked several regulations to encourage homegrown tech companies to remain in the APAC region. Interesting times ahead!

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