How Chinese Mobile Payments Are Quietly Conquering the World

    Chinese mobile payment providers are expanding overseas to capture the large volume of transactions made by Chinese consumers traveling abroad.
    AliPay remains China's mobile payment market leader, but WeChat is doing its best to gain market share.
    Daniel MeesakAuthor
      Published   in Finance

    While mobile payments have been off to a slow start in most of the Western world—even the rollout of EMV chip payments in the United States is far behind schedule—China has become the melting pot for mobile payment solutions. The mobile payment space has become fiercely competitive, with both market leader Alibaba and messaging giant WeChat scrambling for valuable market share. However, what was once a strictly domestic affair has expanded abroad, with China’s mobile payment providers now battling for Chinese tourists’ mobile payments on the global stage.

    According to research by iResearch Global, the transaction volume of Chinese mobile payments reached 10 trillion Chinese yuan (US1.45 trillion) in 2015 and is projected to reach 22 trillion yuan (US3.20 trillion) in 2017. In comparison, the equivalent figure for the United States stood at a meager US8.71 billion in 2015—in spite of efforts made by Apple and Samsung to promote mobile payment features in new smartphone devices.

    As a testament to the central stage mobile payments has taken in Chinese consumers lives, Ogilvy & Mather and Ipsos concluded in a survey of China’s mobile payment market that “[Chinese] mobile payment has permeated all aspects of life and changed basic, everyday habits.”

    Explosive growth in recent years has made China the global leader in mobile payments. (Data from iResearch Global)

    With mobile payments becoming ubiquitous for purchases made in China, that leaves payments made overseas as the next frontier for payment providers who strive to become Chinese consumers’ go-to method for payments—whether at home, online, or on vacation abroad.

    For overseas destinations, hotels, retailers, restaurants, and tourist attractions, this makes the Chinese payment landscape a lot more complicated than it used to be. Until recently, accepting payments through the Chinese government-backed UnionPay interbank network used to be the gold standard for payments made by Chinese tourists. Indeed, updating the points of sale terminal (PoS) to accept UnionPay and slapping a UnionPay sticker on the front door was all that was needed to reach the forefront of Chinese payment implementation.

    The good news is that, given the fierce competition between WeChat Pay (Tencent) and Alipay (Alibaba), Chinese mobile payment providers are now doing their best to rapidly expand overseas by implementing a wide range of local partnerships and marketing programs.

    Alipay, currently the market leader representing some 51.8 percent of all Chinese mobile payments, is pushing its “Airport of the Future” program in destinations frequented by Chinese tourists, hoping to be there for Chinese tourists as soon as they step off the airplane. In fact, it has even begun partnering directly with airlines to offer its mobile payment solutions for in-flight purchases as well.

    Alipay has also entered a long range of strategic partnerships with local players in popular destinations for Chinese tourists which are helping expand the Alipay payment network at all types of PoS operators, such as retailers and accommodation providers.

    Among its local partners are Ingenico, Concardis, Wirecard, and Zapper in Europe, Ascend in Southeast Asia, Recruit in Japan, as well as KICC in South Korea. Just a few days ago, it also announced its acquisition of major U.S.-based money transfer company Moneygram which will provide Alipay with a strong base in the Americas as well.

    For Alipay, working closely with local players is crucial to its work to expand its overseas mobile payments network and leaves most of the heavy groundwork to major non-Chinese players that already have strong footholds in their respective markets. For local companies who wish to accept Alipay, that means that expanding into Chinese mobile payments can be as easy as contacting their existing PoS provider for upgrading payment terminals.

    Meanwhile, WeChat is betting on its growing brand recognition among marketers around the world to become the go-to option for overseas businesses looking to begin accepting Chinese mobile payments. For marketers who want to bolster their following on China’s most popular social network, WeChat Pay provides an excellent argument for implementing WeChat Pay at the PoS: travelers who make WeChat payments to a business will automatically follow its WeChat account.

    Even so, WeChat is also starting to place bets on local partnerships to expand its reach overseas, but so far it’s lagging behind Alipay in the number of local partners it has under its belt. Its better-known local partners include a Thai bank and an Australian FinTech company, with many more partners certain to come. In an industry as frigid as payments in developed markets, relying on local players may indeed be a necessary evil for WeChat as it seeks to displace Alipay from China’s mobile payment throne.

    While it looks unlikely that the gold standard for accepting Chinese payments will ever be as easy as only accepting one particular Chinese payment method again, tourism stakeholders can take some solace in that WeChat and Alipay are doing their best to become easy and attractive to implement.

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