China’s Cashless Month Will Change The Way You Do Business

In the United States, chip and pin cards are a still novelty. In the UK, contactless cards are yet to be taken up in huge numbers and you will be asked if you’re happy to use them. But in China, mobile payments are so normal that in a recent survey of 6,500 consumers, 70% said they could get by for a week with just 100RMB (£11.50~).

In 2014, David Schooch, VP of Ford Motor Group mentioned that such was Chinese consumers’ distrust of banking and electronic payment that 80% of their customers paid with literal “bags of money”.

Today according to Ipsos, 84% of Chinese consumers are happy to leave home with just their smartphone instead of a wallet.

So how has this stunning reversal happened? And how is China’s mobile payments market still growing at over 50% a year?

The answer to China’s technological leapfrog lies in China’s extraordinary tech rivalries and their incredible growth.

China’s mobile payments volume already dwarfs that of the US and this trend shows no sign of slowing in years to come.

A MOBILE REVOLUTION

The groundwork for China’s mobile payments revolution was laid by the widespread adoption of smartphones in China. Over 90% of China’s internet users now access the internet through a smartphone and for many, it is the first and only computer they personally own. The impact of this was first truly seen in eCommerce. Where most Western consumers shop from desktops or tablets, most Chinese consumers shop from their mobiles making up 82% of Alibaba’s take last Singles’ Day, some $14.6bn.

ENTER THE GIANTS

Even before the development of contactless payment technology, the eCommerce giant Alibaba saw the potential of this mobile revolution – producing a smartphone app for its popular web-based payments service, Alipay. Instead of contactless payment, users paid by scanning a QR code, allowing rapid adoption as no new technology was needed at tills – the payment QR codes were simply printed on receipts. It was an extraordinarily prescient move – Alipay stole a march on its rivals and holds 80% of mobile payment transaction values.

At the same time, when we think of smartphones in the West, we are really thinking about Apple and Google – rather than the vanishingly small market share of their competitors. When we are talking about mobile in China though, we are really talking about WeChat. Originally a chat app and now rightfully considered an Operating System to rival those of Apple and Google, WeChat dominates consumer time on mobile. A pioneer in the space, WeChat has allowed 3rd parties in the public and private sector to build ‘mini-apps’ within it and to otherwise leverage its vast user base. Integration with some 300 metropolitan areas connects WeChat users to transport tickets, government services and at one point, allowed WeChat to be used as a driving license.

Payments integration is a logical extension of the ubiquity of WeChat and the sheer ubiquity of the app has driven adoption – capturing 40% of the market by Q1 2017.

Between them these two platforms, Alipay and WeChat Pay dominate the mobile payments market in China, outpacing local banking offerings and international giants alike.

Source: KPCB, Internet Trends Report

RECENT DEVELOPMENTS

So, the reason for the speed of mobile payments growth in China is simple – its two most influential and financially powerful tech companies are fighting for market share through relentless expansion.

Like Uber and Didi Chuxing, the two giants are simply trying to outspend each other, but unlike Uber and Didi, there is no possibility for an exit any time soon. Both companies are simply too well capitalised and influential to back down.

In the past few months we have seen “Cashless Months” and “Cashless Days”, we’ve seen discounts, vouchers, cashback, lotteries and even giveaways of solid gold (a share of an 18,888 gram pot, if you were lucky).

CNNIC, China’s internet monitoring body now thinks 400 million consumers now regularly pay through mobile payments, as we heard, the rate at which Chinese consumers are spending with either physical cash or debit and credit cards is plummeting. In 2016, the mobile payments market tripled in value to $5.6 trillion and is projected to reach $8.26 trillion this year.

CONCLUSIONS

The speed at which China has adopted mobile payments over cash is extraordinary. It is clear that mobile payments are now a norm, not a novelty in China. What’s more, as the fight for local adoption of this technology becomes ever more intense, both top platforms are looking abroad for future growth. Last year China’s tourists spent just over $260 billion according to the WTO and both sides are keen to capture some of this value.

As a result both of the two largest platforms now support most, if not all of the world’s top tourist destinations and with Alipay alone claiming an installed base of 100,000 retailers in 70 countries.

This should be a wakeup call to retailers that haven’t yet added support for either WeChat Pay or Alipay – Chinese mobile payments are now an expectation not an exception.

Contact us at Tong to discover how you can advertise in and alongside these payment services, leveraging China’s largest social and digital platforms to reach millions of consumers before, during and after they buy.

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