On 27 March 2013, the Hong Kong Monetary Authority ("HKMA") announced the findings of a consultancy study on the development of Near Field Communication ("NFC") mobile payment infrastructure. The study affirms Hong Kong's market conditions for implementing NFC mobile payment services and a set of draft operational standards is also expected to be finalised in the second half of 2013 by an industry working group.
What is NFC mobile payment?
NFC is a wireless connectivity technology that allows data to be transferred from one electronic device to another if they are touched or positioned close together, usually no more than a few centimetres.
NFC mobile payment can be effected by the use of payment applications (e.g. credit card payment applications) which are downloaded onto a NFC-enabled smartphone. To make a payment, the customer activates the "mobile wallet" by entering a PIN code and tapping the phone onto a NFC-supported reader. The customer then authenticates his/her credit card and authorises payment. Lastly, the NFC reader will pass on payment information to the credit card backend system.
A NFC infrastructure for Hong Kong
In view of the increasing market expectations in recent years, the HKMA engaged a consultancy study in 2012 on the use of NFC mobile payment services. The recent findings confirm the high acceptance of contactless payments, high smartphone penetration rate and increasing availability of NFC-enabled smartphones in Hong Kong.
As such, the HKMA has established the following long-term development objectives for NFC mobile payment services:
- Developing a multiple payment services platform (ie, for different credit cards) that is available on a single NFC-enabled phone;
- Developing the interoperability of NFC payment platform between different network operators and NFC-enabled phones; and
Ensuring compliance with international security and control requirements.
Whilst it remains to be seen whether the issues of security, reliability and portability of the NFC payment platform will be addressed upon its industry-wide implementation, service providers (e.g. banks) should also be aware of the relevant regulatory issues, in particular those arising from the regulatory supervision of the HKMA.
A draft set of operational standards and guidelines has been prepared as part of the recent consultancy study, which is intended to be finalised by the second half of 2013. Importantly, it is expected that the upcoming adoption of a set of common industry standards will be essential to the promotion of an interoperable NFC mobile payment infrastructure, as well as the general acceptance of mobile commerce in Hong Kong.