Chinese Mobile Payment Systems are more popular than ever. To be precise, the fintech industry is booming. Today, there are around 900 million unique mobile payment users in China. Their transactions total more than 17 billion USD per year, a rapidly growing trend.
To begin with, when it comes to mobile cash transactions, China is light-years ahead of other countries. Actually, the Middle Kingdom is well on its way to becoming a cashless society. So much so that by 2021, 79% of smartphone users in China will not use cash anymore. They will scan, swipe, and tap at the point of sale – online or offline.
Find out all you need to know about mobile payment in China. We at Tenba Group, the social marketing agency for China, you trust, have all the details.
We present the most commonly used mobile payment platforms. Finally, we reveal what a cashless society means for the world moving forward.
What are the main Chinese mobile payment systems?
The growth of mobile payment systems really only started after 2014. Today, cash in China is almost a relic. Two key mobile payment systems dominate the market today.
- Alibaba’s AliPay
- Tencent’s WeChat Pay (and QQ Wallet)
With a 54% market share, AliPay is leading the way. Second is WeChat Pay with a 39% market share. Chinese consumers simply love them.
Alibaba’s affiliate Ant Financial Services is China’s largest e-commerce network. In 2004, they launched AliPay as the first Chinese mobile payment platform. This revolutionized the payment landscape in the Middle Kingdom.
Initially, it was an escrow service to facilitate transactions between sellers and buyers on Taobao, Alibaba’s C2C ecommerce platform. Today, AliPay serves a record-breaking 1.2 billion users around the world.
2. WeChat Pay
Tencent’s WeChat Pay entered the market almost 10 years later, in 2013. As the name tells, it is available through the Chinese social media super-app – WeChat.
With more than 1.1 billion monthly active users, WeChat is the most popular social media platform in China. So, it is not surprising that its mobile payment system is one of the most widely used among Chinese consumers. According to its market share, WeChat Pay has more than 900 million monthly active users. In fact, WeChat’s payment service serves them throughout the many functionalities of the app.
Other Chinese Online Payment Providers
The following providers divide a market share of 7% between them. However, they are still commonly used in China. For example, Union Mobile Pay, 1qianbao, and JD Bank Mobile Wallet. Keep in mind that JD.com and JD Worldwide (ecommerce platforms) also partly belong to Tencent.
How Chinese Mobile Payment Systems Work
Except for very large sums, the providers do NOT charge users for mobile transactions.
Chinese digital payment systems use Quick Response (QR) codes to enable transactions from one party to another. Depending on the merchant or business, QR codes can work in two ways:
- The person making the payment has to scan the merchant’s QR code. It is often printed and placed on the cash register. First, the payment app recognizes the vendor using the app and the smartphone’s camera capability. Then, the buyer can input the amount and confirm the transaction to complete the payment. This method is popular with smaller businesses.
- In the second scenario, the roles are switched. The merchant scans the buyer’s QR code which will be displayed on the smartphone. A unique QR code is generated for each user once they sign up for the mobile payment platform. When the QR scanner/reader recognizes the buyer, the merchant enters the amount to be deducted from the buyer’s account. This account links to the app via their bank card. The second method is more popular among larger businesses that can afford to invest in a QR scanner.
The best thing about QR code-enabled payments is that they can work on ANY smartphone. This is the opposite of Near Field Communication (NFC). This requires NFC technology-enabled phones. For example, Apple Pay uses this technology. On the other hand, QR payments just require an internet connection.
Are there any Downsides?
The only downside here is that in certain parts of China, internet connection is either unstable or very poor. Nonetheless, the ease of mobile transactions via QR payments is a large factor in the fast adoption of mobile transactions in China.
Whereas the market leaders promote and work on solutions to pay without an internet connection, this is not ready for release yet. However, as the market continues to expand, these services are sure to improve.
What are the Benefits of a Cashless System in China?
The main benefits are
- Convenience for consumers
- Customized information (and ads)
- Cash advantages
Let’s look into them in more detail.
1. Convenience for Consumers
Whether you are paying for your taxi ride, a meal in a restaurant, or buying goods from a street vendor, today, almost every transaction in China is via mobile payment. Essentially, thanks to its convenience and ease of use, mobile money transaction is no longer a novelty.
At the same time, mobile payment systems in China offer more than convenience and ease of use. They have had a substantial impact on China’s ecommerce economy. A large number of Chinese consumers make payments via their smartphones. Businesses are reacting accordingly.
Today, international companies like Harrods, Starbucks, and the hotel giant Marriott accept mobile payments. Even the world’s largest shopping mall in Dubai now accepts payments via Alipay. With this, they cater to the needs of Chinese shoppers. Also, Chinese tourists in Munich airport can book their flights and pay for their tickets via WeChat Pay and AliPay.
2. Customized information (and ads)
Moreover, Alibaba and Tencent generate millions of consumer data. For example, spending behavior can be analyzed and marketed. These companies use this information to send users ads about places and things that reflect their previous consumer behavior. Combined with AI, more elaborate advertising scenarios lie ahead of us.
3. Cash Advantages
WeChat Pay and AliPay recently went into partnerships with tax refund companies. This allows consumers to secure rebates on their purchases. In fact, AliPay supports tax refunds in about 80 airports around the world. Both companies are also looking to incorporate financial products such as loans into their systems.
Today, AliPay and WeChat Pay are accepted in more than 50 countries around the world and in several currencies. Chinese mobile payment systems are leading a mobile payment revolution. They are about to change the landscape of transactions around the world.
China’s thriving ecommerce market is largely driven by its mobile-oriented consumer behavior. Unlike consumers in Western markets, Chinese consumers have been less hesitant about adopting mobile payment systems.
Today, China has the largest ecommerce market in the world with a volume four times that of the United States. This is thanks to a world-class digital infrastructure that facilitates Chinese mobile payment systems.
Everyone can appreciate the ease of use and convenience of mobile transactions. As a global force in mobile payments, international brands looking to target Chinese consumers will do well to incorporate Chinese mobile payment systems into their business practices.
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