Why China exceeds so much in payments? We invited an Expert from a top FinTech firm in China to PayPal HQ. Guess what happened?
A lot of you may wonder as I do, why does China exceed so much in payments given that it is still an emerging country? At PayPal HQ San Jose, in Silicon Valley, we hold a bi-weekly Chinese meetup for Chinese employees and external speakers to share topics about technology industry insights, entrepreneurship, VCs, etc.. Last Friday, on 2/8/19, we invited a FinTech research and partnership expert, to share his insights in China Payments, so what we have talked about?
China FinTech Highlights
China as a FinTech Empire
- As the world’s largest mobile payments market, China is estimated at $6.3 trillion in total mobile payments by 2020.
- Payment app usage is the highest in China, where an estimated 81.4% of smartphone users will access such apps in 2019. The user base primarily relies on Ant Financial’s Alipay and Tencent’s WeChat Pay.
Domestic Dominance in FinTech: Duopoly of WeChat Pay and AliPay
- Alipay and Tenpay collectively held a 90% share of China’s third-party mobile payments market.
- Mobile commerce, a lack of legacy infrastructure, and marketplaces have fueled China’s enormous success.
- Consumers in China are much more comfortable shopping on their mobile phones compared with their counterparts in the US
Global Payments
China among countries with high proximity mobile payment adoption: An estimated 81.4% of smartphone users in China will access payment mobile apps in 2019.
Our speaker mentioned the “9+1 pattern(9+1格局)” of global payment, which stands for 9 emerging countries with the lead of “One Belt, One Road(一带一路)”, from Alipay China. Ant Financial is forming joint ventures with the 9 countries’/regions’ digital wallet firms:
- India — Paytm
- Thailand — Gateway
- Korea — Kakao Pay
- Philippines — GCash
- Hong Kong, China — Alipay HK
- Malasia — Touch ‘n Go
- Indonesia — DANA
- Bakistan — Easypaisa
- Bangladesh — bKash
As he said, in these countries, Ant Financial is investing in huge stakes, with non-holdings, in these “digital wallet brothers” and the local wallets are using local brands and languages to operate.
The US Compared with China
The US is expected to generate $580 billion by 2019 which equates to just 11% of China’s mobile payment volume.
US Proximity Mobile Payment market is fractured: consumers have a variety of payment options like Apple Pay, Google Pay, Samsung Pay which has combined into an inconsistent checkout experience
Chinese FinTech Major Players
Chinese Major Mobile Payment Players: WeChat Pay and Alipay all together drive close to 90% of the mobile payment transactions.
Various use cases include Didi Chuxing [“Chinese Uber”], the largest car-sharing service in China, Meituan [“Chinese DoorDash + Yelp”], the largest food delivery service in China, and WeChat Envelope [Sorry I cannot find a parallel since this is a Lunar New Year’s tradition to give red envelopes with cash to children].
Unlike in the US, where people are transitioning from credit cards and debit cards to the digital wallet, in China, people are adapting to mobile payment directly from cash. They skip the step of using cards and directly to mobile payments. As shown below, cash is only more acceptable when mobile payments are not accepted and cards payment are even less accepted.
Tencent: WeChat’s History
Launched in 2013, WeChat Pay is embedded into its massively popular mobile communication platform, WeChat. The launch of WeChat red packets in 2014 and the use of WeChat Pay in the rise of online ride-hailing. Many observers view the ingenuity behind the red packets as pure genius: taking a beloved cultural phenomenon, turning it into a game that builds on and fosters social interactions, driving customer acquisition costs down to zero.
Ant Financial: Established in 2015 as Alibaba’s online financial affiliate
Why China exceeds the world in payments?
- E-commerce boom
- Social Media prevalence
- Lack of existing physical payment infrastructure and low-cost QR code
For more information, visit Wharton Fintech for the reasons that China grows more rapidly than the world in fintech: https://medium.com/wharton-fintech/fintech-in-china-an-introduction-6b11abd9cb64
In the meetup, the speaker has also shared much insights in the 2b business of Ant Financial. If you are interested in the 2b fintech environment, stay tuned. We will post more about b2b and other related fintech articles.
Thanks eMarketer, CB Insights, Ipsos for the industry information!
