“Is mobile payments not a thing in Australia?”, Sam waved her smartphone at me and a familiar looking interface glanced backed at me.
It reminded me of Wechat, China’s most popular chat app. Very quickly she clicked on one of the icons and the cashier scanned her QR code and the transaction was complete.
“I thought you worked in FinTech”, she smiled. Sam works for Ant Financial, formerly known as Alipay, it is one of China’s largest online and mobile payment platforms processing an estimated 58% of all online payments.
Feeling self conscious, I raised my eyebrows in confusion. I was being mocked for carrying around a wallet.
I’m familiar with mobile payments — Tyro supports ApplePay and Android Pay, yet the way Alipay works is very different. Almost like a shadow bank, it provides a wide range of solutions including making and receiving payments easily (that’s right, you can receive payments), making investments in a format similar to deposits, and taking out personal loans. Yuebao, the investment functionality within Alipay became the world’s largest money market fund back in April 2017.
Sam had paid for our meal in seconds and the transaction was completed without any point of sale system, EFTPOS facility or even a scanner. Just two smart phones.
The death of cash
I had last visited Shanghai two years ago when it was still very much a cash based economy. Mobile payments were in their infancy, Alipay and Wechat were competing for the burgeoning market with advertising and incentives littering retail and hospitality stores. Shoppers had to be convinced to ditch their wallets.
Today, I can’t wave down a taxi on the street. All taxi services are ordered through Didi, China’s answer to Uber. The affordability of entry-level smartphones has transformed markets that traditionally only accepted cash.
China has a $5.5 trillion mobile payments market, fifty times the size of the US. Their middle class population currently sits at 300 million which is on track to almost double by 2020. The dominance of mobile payments means companies like Alipay and Tencent have access to hordes of personal data, they work with the Chinese government by sharing this data, allowing them preferential rights in the marketplace. This preferential environment helped the big 3 (Alipay, Tencent and Baidu) thrive, where they can depend on favourable policies to defend their position.
Over time, they’ve formed closed ecosystems of in app functionalities — one app to rule them all, where other solutions are cross sold within the primary application.
The tech supermarket
Sam’s next stop was Hema. It looked like an ordinary supermarket, except that it was absolutely packed. Hema was a curious investment by Alibaba group. Why would a tech giant invest in FMCG retail?
The business model is completely cashless, in fact you can’t use anything except for mobile payment technology. Merging online and offline shopping experiences, it’s integral to Alibaba’s retail strategy and the vision is to eventually help traditional retailers transition into the digital age.
As we browsed endless aisles of goods, I saw some Hema employees running around with shopping bags, presumably packing online orders. Then they dropped the bags off at a conveyor belt that takes the orders to a delivery centre adjacent to the store.
The promise is delivery within 30 minutes. Shanghai’s high population density and mature e-commerce supply chain system can make such promises. I later tested this value proposition by ordering a bottle of soy sauce online, it was delivered within 12 minutes. The bottle cost $4 AUD, delivery fee — $0. The world has gone insane…
Driving global trends in Fintech
The sheer amount of data and users means China is now dictating the trends and expectations of Fintechs at a global scale. Currently 300M users, soon to be 550M by 2020, are getting online, mobile first, at the kind of adoption speed we have never seen before. These users expect sophisticated in-app functionalities, convenience and data integration.
We need to look beyond our regulatory restrictions and the big four banks in Australia, starting by looking to our neighbours for trends that will soon influence our environment.
