offline merchants in China allow payment by QR code
method will eventually come out on top is yet to be seen.
Apple and Samsung’s services, both launched in China this year, are based on near-field communication, technology that enables two electronic devices to “talk” by bringing them within a few centimeters of each other. However, which method will eventually come out on top is yet to be seen.
“The landscape of payment industry is changing rapidly. Paying by QR code is certainly leading the way in China right now, but one of the challenges in further development this method come from convincing more offline merchants in China to update their cashier systems to enable QR code payment,” she said.
An estimated 1 million offline merchants in China allow payment by QR code. Meanwhile, about 15 million cash machines support payment by debit or credit card, and about 6 million support payment via nearfield communication.
“The infrastructure for near-field communication payment is good,” Fang said. “But as late movers, companies that provide NFC-enabled payment services really need to step up their efforts to help users form the habit of using such payments.”
In addition to internet companies, banks and other companies, such as real estate developer Wanda Group, have made moves to expand into the mobile payment market.
Tang Kok San, country manager for Worldpay China, a payment processing company in London, said the battle for supremacy in the payment app market is just heating up.
“Never before has consumer choice been so broad,” he said. “There’s no doubt China’s mobile payments space is getting bigger and more competitive.”
The fierce competition, as well as the growing number of Chinese outbound tourists and their rising spending power, has prompted Chinese companies to look abroad for new growth momentum.
Eric Jing, president of Ant Financial, said the company aims to have 2 billion customers using Alipay in the next decade, with about 60 percent from outside China. However, he conceded that developing countries that are relatively weak in finance infrastructure offer more potential than developed regions.
Last year, Ant Financial invested in Paytm, one of India’s largest digital transaction platforms, and since then the Indian company has seen its customer base grow by 22 million to more than 130 million users.
But Jing hasn’t given up on his dream of cracking the West. He is pinning his hopes on convincing businesses in developed countries to allow Chinese travelers to select Alipay as their first-choice payment option.
“By changing the habits of Western businesses, we hope we can one day change consumers’ habits, too,” he said.
To seize the opportunities brought by China’s National Day holiday (Oct 1 to 7), one of the most popular seasons for outbound travel, Ant Financial reached a deal in September with 10 overseas airports, including Munich, Singapore Changi, Narita International (Tokyo), to ensure Alipay is accepted there.
WeChat, and Baidu Wallet, which is run by search engine operator Baidu Inc, have also stepped up efforts to make sure Chinese tourists can use their apps in more shopping malls and airports overseas.
Li Chao, an analyst for iResearch Consulting Group, said the swelling number of Chinese outbound travelers and their spending power are only part of the reason companies are looking abroad.
“Intense competition has dragged down profits for digital payment services in China,” he said. “Looking abroad is in line with their internationalization strategy and the goal to be more profitable. The best way to start is with Chinese outbound travelers.”
However, Tang at Worldpay China said the European market is already crowded and there is a sense of “app fatigue” setting in among consumers, so it may take a while for WeChat and Alipay to reach similar heights in Europe and the United States.
“But these businesses can offer something new and unique to the app fragmentation that currently dominates mobile use in the West,” he adds. “They have the potential to disrupt the status quo and fundamentally change the way social media platforms are used by consumers in these markets.”