China, a country where cash doesn’t exist – WeChat, Alipay
Interestingly, China (more specifically Chengdu) was the first country to introduce paper cash, yet it now dominates cashless mobile transactions. In 2016, the Chinese spent $5.5tn through mobile payment platforms. For comparison, this is 50 times more than the US. For this reason, it is crucial for your business to tap into this market and use China’s high smartphone usage to reach Chinese consumers.
This blog post will discuss ways to take advantage of this massive smartphone market, such as ensuring your website is mobile-friendly, compatible with Chinese phones, and integrated with Chinese payment methods.
Payment methods – in-store
How would you summarize China’s payment methods? In just three words: “QR codes everywhere”. It is very common for people to carry nothing but their smartphone. In fact, a recent survey found that 70% of people thought carrying cash was unnecessary2. Long gone are the days when people would use cash and cards; nowadays, instead, people carry phones and power banks!
Chinese consumers do not just use their smartphones to purchase products online through websites and mobile apps; they also use them to pay in physical stores. China is far ahead of any other country in that matter, with over 38% of shoppers using their smartphone to pay for products in-store3.In some cities, even buses, street vendors and market stalls support this payment method. Furthermore, in Hangzhou, home of technology innovator Alibaba, visitors of the major Buddhist temple can even make electronic donations with the payment apps. This works through two different providers, WeChat Wallet or Alipay.
The two Payment Methods in China: Alipay and WeChat
China’s mobile transaction market is immense. During the first three months of 2017, transactions amounted to 18.8tn CNY ($2.76tn)4. Alibaba’s Alipay and Tencent-backed Tenpay (embedded in the WeChat app and called WeChat Pay) hold 90% of the market share1 for mobile payments. This leaves little room for competitors and makes market entry difficult. A prime example is Apple; even in China, a well-distinguished firm, it launched its own payment method in 2016 but struggled to become a genuine threat to the dominance of already established Chinese versions.
WeChat Wallet (微信支付)
WeChat is a very popular multi-functional “super” mobile app with more than 938m active users globally (almost 1/7 of the world’s population). 500m of these are in China alone. There, WeChat users make up 79.1% of all mobile phone messaging app users6. In fact, WeChat is considered the most advanced mobile messaging app globally because of its functionality and the array of services it offers to users and businesses4.
WeChat links users’ bank cards to the app, allowing them to scan QR codes to make payments. The WeChat wallet function is a very popular feature with over 300m users (as of 2017) having their credit card linked to their account7. The feature provides a clear and simple way to make in-store purchases. Users get an immediate notification when the code is scanned, and a separate ‘service message’ notification appears in the app’s chat section once the payment goes through. By clicking the service message, users can view previous transactions, making it easy for Chinese consumers to track their spending. Additionally, for those concerned about privacy, money is sent as a one-off, meaning there’s no need to sign up for mailing lists and no user information is exchanged.
WeChat Pay is a truly multifunctional app which also allows firms to provide coupons and loyalty cards. Coupons allow users who follow the company’s WeChat Official account to get discounts when making a purchase. A common way to do this is through “VIP cards”, which help increase customer loyalty by offering better prices, discounts, money-off, and rewards. This allows consumers to get better value for money and enables firms to gain customers’ loyalty, increased popularity, and self-promotion.
But it doesn’t stop there. WeChat’s wallet feature can be used not only to pay in physical stores but also to transfer money between two individuals through a “simple transfer” or a “red packet”. The former refers to the direct transfer of money into the other person’s account; the latter is based on the Chinese tradition of ‘hongbao’ (red envelope), where money is given as a gift.
Each of these money transfer methods is simple to use and takes effect almost immediately, making it easy to track incoming and outgoing spending. In addition, the app lets users move money between their bank account and the app effortlessly, as much as they like, which further supports expense tracking.
Alipay (Zhi-fu bao 支付宝)
Alipay is China’s most popular payment app, with over 450 million registered users worldwide (2017)8, 100m daily active users9 and 300m users in China10. Alipay is known as the “Universal PayPal,” which, in fact, overtook PayPal as the world’s largest mobile payment platform in 201311
Alipay offers a payment system similar to WeChat, allowing users to pay for day-to-day expenses, pay bills, transfer money between individuals, and move funds to and from their bank accounts. Alipay provides payment services globally for 65 financial services, including Visa and Mastercard12, as well as payment services for Taobao and Tmall, China’s largest online retailers (like Amazon and eBay in the Western world), along with over 460,000 Chinese businesses13. Furthermore, Alipay currently supports transactions in 14 major foreign currencies.
Alipay recently launched facial recognition and “smile-and-pay” technology in Hangzhou to attract younger users. This technology doesn’t even require users to carry their phone and is one way Alipay hopes to expand globally and ensure future growth.
Although Alipay is available worldwide, it doesn’t command the same dominance in Western society as it does in China. This is because established mobile payment apps like Apple Pay and Google Pay make it difficult for Alipay to enter the market. However, its expansion still mainly aims to support Chinese tourists who travel abroad.
Summary
These payment methods provide a range of benefits to Chinese consumers, allowing them to make quick, easy in-store payments, pay bills, and transfer money. Individuals can track their spending and receive immediate notifications. The rise of mobile payment apps is especially important because Chinese customers don’t like to use credit cards, as it technically puts them in debt. A recent study found that only 1% of transactions in China are made by credit card15. Therefore, the mobile payment market seems like the logical way to establish a cashless society.
Thus, to expand your business successfully, it is crucial to be aware of this and use online, mobile, and non-cash payment methods. This way, your business will reach Chinese consumers more easily and get the most out of expanding into China. People buy using QR codes, and vendors sell using QR codes; this makes everyone a potential customer!
References:
2 – A survey recently conducted by Beijing Youth Daily showed that
3 – https://www.applause.com/blog/mobile-payments-global-adoption/
4 – China’s WeChat and Alipay lead the world into a cashless society
5 – https://techcrunch.com/2017/02/28/apple-pay-china-one-year-on/
6 – China’s WeChat and Alipay lead the world into a cashless society
7 – from blog number 1, older version
8 – https://techcrunch.com/2017/05/09/alipay-first-data-us-point-of-sale-expansion/
9 – https://expandedramblings.com/index.php/alipay-statistics/
10 – https://www.cultofmac.com/430111/in-china-you-pay-with-cash-or-alipay/
11 – John Heggestuen (11 February 2014). “Alipay Overtakes PayPal As The Largest Mobile Payments Platform In The World”. Business Insider.
12 – ↑” About Alipay”. Alipay. Retrieved 10 October 2013.
13 – https://bafybeiemxf5abjwjbikoz4mc3a3dla6ual3jsgpdr4cjr3oz3evfyavhwq.ipfs.inbrowser.link/wiki/Alipay_(payment_platform).html
14 – https://www.techinasia.com/alipay-mini-programs-open-to-devs
15 – https://www.marketplace.org/story/2008/09/05/chinese-prefer-paying-cash