Rise of Mobile Payments in China
Digital Retail is expanding in China
The rise of e-commerce and big data have disrupted traditional business models as digital retail becomes a common point of differentiation between local China enterprises and MNCs who have expanded into China. Local Chinese companies have been swift to spot the change in consumer behaviour and rapid uptake of mobile technologies to promote greater product innovation and accelerate speed to market.
Many have leapfrogged traditional media and gone direct to digital media, especially mobile platforms such as Weibo or WeChat, to market and promote their products and services to new market segments. Major internet companies are using their social platforms to collect customer information and also created transaction platforms to understand consumer spending patterns. Big data is also another area where the Chinese companies are investing to better understand and create tailor-made products and services for their customers.
Mobile Payments landscape in China
With the rise in ecommerce transactions over the years in China, the mobile payment landscape has been a hotly contested field. Currently, most ecommerce purchases are done through platform sites rather than directly through branded sites. Currently, the most popular payment method is Alipay which the Alibaba group launched this payment service in 2004 to build online payments for transactions of goods and services.
Alipay takes close to half of the mobile payment market share in China, with growth rate twice that of credit cards. Most credit card payments is transacted in RMB and virtually all of this revenue would be processed through local China banks using the China UnionPay Platform. In the past, China has not allowed foreign companies to clear electronic payments in its domestic market. This effectively made it impossible for companies like Visa, MasterCard and AMEX to process domestic transactions in China hence China UnionPay has emerged as a leading brand in the local credit and debit bank cards market.
Cash on Delivery (COD) is also another important mode of payment and especially as there remains a lingering concern with Chinese shoppers around authenticity of products purchased. The COD approach gives consumers a certain level of confidence as it enables them to pay after they have seen the products purchased.
Other payment methods are formed by messaging platforms such as WeChat and Sina Weibo. These messaging platforms have added payment options to their services and are fast becoming a key payment option for smaller payment amounts and in peer to peer payments. This has allowed them to become important players in the mobile payment market due to the rise in popularity of instant messaging platforms and brands advertising actively within the communities in the platform.
Over the years, I observed heated competition in the market for peer to peer payments using mobile messaging apps. Alipay wallet app and WeChat have been going head to head in a digital lucky money war. Several billion RMB has been given away to consumers in the form of e-coupons. This is to encourage consumers to activate and link their mobile apps to their bank and credit accounts, opening the way for further payment using these apps.
Mobile Payments facilitating rise in cross border trade
Lastly in terms of overseas ecommerce transactions, Alipay has made great progress in being accepted overseas as payment. The ‘Alipay ePass’ system has allowed US retailers to let Chinese-commerce shoppers pay through domestic Alipay accounts. Overseas ecommerce providers are also increasing becoming more aware of further localisation and customisation to offer Chinese consumers more convenience through acceptance of AliPay and UnionPay for overseas ecommerce purchases.
With the surge in cross border ecommerce transactions and the subsequent rise of mobile payment facilities, it will meant greater convenience and also opportunities for Chinese merchants to expand and tap into new markets and also allow foreign companies to effectively expand their distribution network and grow revenues exponentially in China.