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Hong Kong E-Wallets Navigate Growth Challenges on Path to Profitability

Amid the rising popularity of e-wallets in Hong Kong’s payment landscape, challenges are emerging for these digital payment platforms to attain profitability, a new report has revealed.

Analysis by Quinlan & Associates, a strategy consulting firm focused on financial services, delves into the hurdles that Hong Kong’s e-wallet providers are encountering while expanding their merchant base and monetising their services.

Its report titled Winning Hong Kong’s Merchant Payment War: Revisiting the Battle Plans of Hong Kong’s E-Wallet Providers reveals that despite the robust growth propelled by changing consumer behaviour and government stimuli, e-wallets face obstacles tied to high acquisition costs, slow activations and limited growth in the absence of incentives.

These factors have raised questions about the profitability of e-wallet providers in Hong Kong.

Benjamin Quinlan, CEO & managing partner of Quinlan & Associates, highlights the transformative role of e-wallets: “By democratising access to digital payments for underserved customer segments and delivering enhanced convenience, connectivity, and new offerings, e-wallets are helping to transform the digital payments landscape in Hong Kong.”

However, these e-wallets confront substantial hurdles despite their growing user bases.

Challenges

One of the key challenges is the cost associated with acquiring merchants. E-wallets invest heavily in marketing expenses and partnerships, resulting in high expenses. Moreover, many e-wallets encounter difficulties in timely merchant activation.

Quinlan elaborates: “E-wallets incur significant merchant acquisition costs, with high marketing expenses and hefty pay-aways to partners, such as agents and acquirers. Many are also facing sizeable drop-offs and obstacles in achieving timely activation.”

The report further underscores issues related to merchant activation and engagement. Several e-wallets struggle with low merchant engagement rates in their marketing campaigns.

“Despite heavy investments, e-wallets’ merchant-focused native social media content has seen a lower average engagement rate than average B2B content across most platforms,” says Quinlan.

These low engagement rates translate to poor conversion rates, impacting the growth potential of e-wallets.

Moving forward

To address these challenges, Quinlan & Associates suggests that e-wallet providers should focus on targeted strategies.

“By identifying and targeting high-potential merchant segments, e-wallet providers can better customise their merchant acquisition and maintenance models, design more targeted marketing campaigns, and establish more nuanced pricing propositions.”

Diversifying offerings and exploring innovative monetisation opportunities could also bridge the profitability gap for e-wallets.

As Hong Kong’s e-wallet landscape evolves, these findings signal a critical juncture for providers to adapt their strategies and navigate the challenges to secure a sustainable future in the dynamic digital payments ecosystem.

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