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In Hong Kong鈥檚 increasingly cashless payments landscape, taxis are a rare case of cash still being king. But that could be set to change following a first-of-its-kind regulatory approval.
Taxi Pay, a subsidiary of local fintech Wonder, has become the first and only payment gateway to聽 from the Hong Kong Transport Department to deploy a smart taxi meter.
The meter is a unified point of sale (POS) system connecting the fare calculator to a payment terminal. It offers more than 18 local and international payment options, including cards, digital wallet and QR code payments.
Wonder said its decision to develop Taxi Pay came in response to increased demand for digital fare payments, particularly among mainland Chinese and international travellers.
The Taxi Pay system builds on聽, a more basic offering launched in 2023, which allows passengers to scan a QR code sticker within the vehicle to pay the driver.
Prior to Taxi Pay, Wonder was known for being the first Hong Kong fintech to offer a fully digital payments gateway that allows merchants to self-KYC with one-day onboarding.
As of March 2024, Wonder said it has served more than 10,000 merchants and facilitated more than $10bn in digital transactions.
Instant settlements for taxi drivers
In 2023, Wonder introduced T+0 instant settlements for merchants and became the primary acquirer for the Mastercard, UnionPay, JCB, Discover and Diners Club card networks in Hong Kong.聽
Taxi Pay will also use the T+0 instant settlement model, meaning that passenger fares can be accessed by drivers within the same day that the payment was made.
The instant settlement feature is made possible by liquidity provided by ACORN, an Asia Pacific-focused private debt investor.
Making passengers cover the payment costs
Another key feature of Taxi Pay is that passengers rather than merchants (i.e., drivers) will cover the transaction fees. These 鈥渉andling fees鈥 will be set at 3.5 percent per transaction.
During the first three months, to encourage adoption of the service, handling fees will be waived for passengers who pay by Visa, Mastercard, UnionPay, JCB, Discover, Diners Club and Hong Kong鈥檚 Faster Payment System (FPS).
Similarly, during the first two months, passengers who use UnionPay will be able to receive a 10 percent discount on their fare.
Wonder鈥檚 reason for shifting the transaction costs to passengers is to incentivise drivers to sign up. Previously, attempts by other payment providers to offer digital payments in Hong Kong taxis have been rejected by drivers due to what they see as excessive fees.
The result has been that taxis in Hong Kong have remained largely cash-only, while much of the rest of the territory's economy has become聽.
Meanwhile, urban areas in mainland China, particularly in the Special Economic Zones (SEZ) adjacent to Hong Kong, are now almost entirely cashless.
As covered by聽, this has led to the 鈥渆mbarrassing鈥 problem of international travellers arriving in Hong Kong and jumping in a taxi, only to discover that they need cash to pay for it.
Subsidised payment terminals for drivers
Taxi Pay has also put aside a significant budget to ensure that its smart meters and payment terminals are quickly adopted by drivers.
As part of an 鈥渆arly bird鈥 scheme, Taxi Pay will provide eligible taxi owners with a free smart meter and payment terminal, which are valued at HKD 5,800 ($740) and HKD 2,800 ($357) respectively.
Wonder said the scheme has already led to more than 1,000 taxis being onboarded to Taxi Pay. By the end of 2024, the company aims to recruit at least 8,000 taxis across Hong Kong and its surrounding islands.
Further enticements to join Taxi Pay are offered by the Driver Assistant app, a platform that aggregates orders from the many ride-hailing services that operate in Hong Kong.
