China Opens Its Payments Doors

Rishi Taparia
Nov 9, 2019 · 3 min read

Being a tourist in China just became a whole lot easier. Alipay and WeChat Pay — the dominant, QR-code based payment methods that have taken the world by storm — are now available for use by foreigners. This is a significant milestone for the companies and the country, and a harbinger for global expansion.

Image courtesy of MarketingToChina.

Alipay and WeChat Pay have redefined the payment landscape, both at home and around the world. In 2018 these two platforms together processed almost $40 trillion dollars. For context, Visa processed $11 trillion dollars in the same year. Thanks to the ease of use of the platforms, mobile payments usage in China is up more than 28x from 2013. The payment based QR codes are so ubiquitous — found in every mall, street market and restaurant — they are even used by panhandlers! Many vendors no longer accept cash, ironic considering it was China that introduced the world to the first banknotes 1,400 years ago. As the country continues to migrate toward a cashless society, one group can now finally participate in the movement: tourists.

Please take my money

Until this week being one of the 30 million tourists that visit China every year meant less-than-seamless shopping. Traditional credit cards aren’t typically accepted (until last year US-based card networks didn’t have permission to do business in the country), cash is getting harder to use (QR code payments are just more convenient for merchants — no cash to protect from theft) and onboarding to Alipay or WeChat Pay required a local bank account which is near impossible to get (I’ve tried many times). This left the amazing commerce experiences available in China inaccessible to tourists.

Alipay and WeChat Pay have now received permission from the Chinese government to enable non-Chinese users onto their apps. This marks a new phase in the game of 4D chess being played in global payments.

Alipay’s tourist onboarding instructions

Phase 2 begins

For Alipay and WeChat Pay the last five years have largely been about 3 key initiatives:

  • Bring more Chinese consumers onto the platform
  • Acquire merchants to drive seamless and ubiquitous acceptance for users
  • Drive adoption of their own QR code standards

The next five years will be about laying the foundation for the worldwide ambition.

It was always a question of when, not if, Ant Financial and Tencent would bring non-Chinese citizens onto their financial products. Payments, and financial services more generally, are about driving ubiquity. In payments ubiquity trumps novelty every single time. The more customers using more products the better. Ant Financial in particular now has a financial platform that includes payments, lending, insurance, wealth management, credit scoring and more. Bringing foreigners onto this payments stack is the next step toward providing a full FaaS (Fintech as a Service) suite. This will result in Ant and Tencent (and the Chinese government) collecting personal, financial, and transaction level data on foreign nationals, an important strategic asset with major political ramifications (reminder: China has only let one US based payment network operate in country). He who has the payments makes the rules and China now has a very large seat at the payments table.

On its face, the announcement this week seems relatively benign: a nice win for travelers with some showmanship and marketing before what is sure to be another monster Singles Day. Make no mistake: this is a major milestone for both companies and for China. Given the current global political climate it is important for the world to note: Phase 2 begins now.

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Rishi Taparia

Written by

Dad and husband | SVP @LegionTech | Angel @garudavc | Alum @Poynt, @MatrixPartners, @ScaleVP, @MerrillLynch, @NorthwesternU

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