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3rd Jan, 2016

Bank of China (HK) Launch e-Cheques, 'People Will Love It' - But is it a Case of New Tech and Old Thinking?


In September 2015 Hong Kong Monetary Authority (HKMA) chief executive Norman Chan Tak-lam announced the arrival of e-cheque services to the Special Autonomous Region, a move the chief of the city's de facto central bank said would herald a new era of banking convenience that the cheque reliant society of Hong Kong 'will love'.

However long before the launch, the HKMA had seemingly already assured the short-term success of the new payments scheme by signing on nine of the Region's largest banks as launch partners, including Agricultural Bank of China, Bank of China (Hong Kong), Chiyu Banking Corporation, Fubon Bank (Hong Kong), Hang Seng Bank, Nanyang Commercial Bank, The Bank of East Asia, The Hongkong and Shanghai Banking Corporation and Wing Lung Bank.

Voila_Capture 2016-1-3_04-56-23_pmThese nine banks account for approximately 70 percent of the average 450,000 cheques that are issued every day in the Region, according to figures published by the South China Morning Post (SCMP). The Authority also noted that a further nine banks would be added at a later date, which will no doubt cover off a large portion of the remaining 30 percent.

In support of the launch the HKMA has also released a public information pamphlet which explains some of the payment scheme' benefits and features.

But in the current climate of payment disruption, and the rapid evolution of the electronic payments industry, iSky Research is wondering whether the introduction of e-cheques to Hong Kong is really a new technology people 'will love' and embrace, or more a case of the final phases of evolution for a dying financial payments technology.

As the HKMA notes in its aforementioned pamphlet, and as Bank of China explains in a recent email it sent to customers (shown below), the process for sending or receiving an e-cheque will involve two steps (the payment and acceptance of a payment) as well as two-factor authentication at the payment creation stage - which, with Bank of China, must be done by e-Token.

These announcements come at a time when the payments industry has been mulling over the speculation that Apple may soon incorporate a payments feature into its iMessage services, based on the surfacing of a patent the company is thought to have filed in December. Similarly, FinTech payments pioneer Square held its IPO this past November, whilst Samsung and Android have also been actively announcing expansion plans - most notably into the Chinese market place.

These latter companies have arguably evolved from the principles of technological simplicity, wherein breaking down barriers (and decreasing the steps required to complete a payment) have been the objective, in order to foster increased customer uptake - all whilst maintaining security through encrypted transactions and consumer choice in layers or tiers of security.14-1-131

At the same time it must be acknowledged that e-cheque services are not a new payments phenomenon, or even unique to the Hong Kong marketplace. E-cheques have been available for years in an equally cheque reliant, if not more reliant society in the USA. Even the Bank of Melbourne in Australia, a society that has embraced FinTech with a fervour seen in few other places, has offered electronic cheque depositing services to customers for some time (see screenshot). Yet each of these countries seems to now be looking beyond the cheque.

A recent report from Ernst and Young suggests that "Hong Kong is the top region for fintech adoption by a sizeable margin":

Hong Kong leads: 29% of digitally active people in Hong Kong said they have used at least two fintech services in the last month. Ernst & Young defines fintech as "financial services products developed by nonbank, noninsurance, online companies."

Whether a populous increasingly prepared to engage with non-bank based fintech companies will embrace - in the longer term - a bank-based technology driven by decades old systems and processes will be a matter of wait and see, but in the era of Blockchain, mobile payments and digital disruption it is difficult to see a prosperous future for highly regulated e-chequing systems in Hong Kong or elsewhere.

That said, e-cheques are here, and with nine launch partners in tow it will certainly make for a very visible presence on the Hong Kong banking landscape in 2016.

In support of its an e-cheque launch Bank of China (HK) emailed its retail customers yesterday to inform them of the processes, benefits and features of the bank's new e-cheque system. The screenshots below provide a copy of the email (taken from a web based version), along with shots taken from the links embedded in the email, including 'More Information', 'Issue' and 'Deposit cheques, and the BOCHK 'e-cheque dropbox'.

Scroll down to see more.

BOC Email More information BOC cheque deposit E-Chqeue Issue Dropbox