The exceptional circumstances of recent months have led to a worldwide boost in the growth of mobile payments. Physical money as a possible factor in the transmission of the virus and the avoidance of physical contact in payments has led to a radical change in consumer habits at the global level.
Long before the coronavirus came into our lives, China had already become the bastion of mobile payment through two platforms: WeChat and Alipay. Mobile payments have cornered physical money in the Asian country and it is estimated that it could make it disappear in the next 5 years.
? What would happen if cash disappeared?
Neither Apple Pay nor Google Pay, those who dominate are others ?
To put it simply, WeChat is the leading messaging application in China. Sort of like the Chinese Whatsapp, but vitaminized and enhanced to the nth degree. Tencent, the company behind WeChat has added so many options to the application that it has become a basic tool in the daily life of the Asian country’s population. From WeChat we can see news and interact with known and unknown people as we do in Facebook, Twitter and Instagram. But we can also order food at home, pay our electricity bills, request a taxi and of course pay in shops. Some have called it the Swiss Army Knife of applications because of its many options.
How does WeChat work? ?
Alipay is the payment method of the Chinese giant Alibaba. In the West we know this company from the Aliexpress shop, the Chinese Amazon that connects manufacturers in the Asian country with European private buyers.
How does Alipay work? ?
Both payment platforms have grown exponentially in their home country to the point that less than 10% of the country’s transactions are now made with physical money. Of the remaining 90%, 4 out of 5 transactions are made through the WeChat and Alipay platforms and only one in five is made with a credit card. The figures are dizzying and are expected to continue to grow by 11% annually in China over the next two years according to the Payments Journal portal.
Such is the importance of both platforms in commercial transactions that the Chinese government had to regulate to allow the use of foreign cards in applications as tourists and visitors were unable to pay at establishments throughout the country.
Difference between Chinese mobile payments and those from the rest of the world ?
In Europe and the United States, mobile payment has become popular through Apple Pay, Google Pay, Samsung Pay and the digital wallets of banks such as Santander Wallet. All these payment platforms share the same approach to the future of payments through the NFC of the mobile phone. Our mobile phone works like a credit card when you bring it close to the PoS.
? This is how you can pay without taking your credit card to the beach with Santander
The approach to mobile payments in China, however, has been made in a radically different way. The generation and scanning of QR codes between merchants and users has become the payment method by excellence.
But why such a radical difference in payment? The explanation is mostly economic. Although the inclusion of NFC is increasingly common in phones of all ranges, 4 years ago only high-end Android phones added this antenna that facilitates mobile payments. Apple phones however do bring NFC from the iPhone 6, although they are not as popular devices in Asia due to their high price. It should also be noted that Apple has not yet launched its mobile payment service in this country.
In addition, the entire fleet of PoS needs to be modernized to accept contactless payments in a country of 1.2 billion people.
Tencent and Alibaba therefore looked for a way to make mobile payments reach everyone regardless of their mobile phone, giving even street traders the possibility to charge for their products without the need for a POS. The answer was payments by QR codes. And the truth is that they did not do badly. According to the portal expandedramblings.com, WeChat Pay has 800 million active users per month and Alipay about 1200 million, 300 million of them outside the Chinese borders. Outrageous figures in both cases that show the enormous potential of the Chinese market. To give you an idea, Apple Pay is available in 48 countries and has about half as many users as WeChat and Alipay (between 400 and 500 million).
And what was the reason for this success? The background was good: a society that was not excessively bankable, in full economic expansion and anxious to consume. A new generation of young people who, beyond the strict control of the Chinese government, were curious about Western habits and their way of relating. A street trade of small stands and stalls that is still part of the DNA of Chinese life. And of course, an application, WeChat, supported by the Chinese administration itself, which became indispensable in every Smartphone.
All that was needed was a good user experience that would facilitate payments and voilà! The explosion of mobile payments happened. Paying with WeChat or Alipay is extremely easy. The establishment only has to scan the QR code that we present in our Smartphone to make the payment instantly. The customer can also scan the shop’s QR, choose the amount to pay and then the shop will receive confirmation that the payment has been made. Fast, simple, universal and of course without contact.
Of course every coin has two sides. WeChat and AliPay know how much, when, how and on what their users spend their money and both companies have been accused of being able to share this juicy information with third parties and even with the Chinese government. A situation that contrasts with the privacy that Western Wallets promise their users.
Will they conquer the rest of the world??
The relationship of both companies with China may make Western users wary of adopting these platforms for payment purposes. Moreover, it seems that neither WeChat nor Alipay are particularly keen to consolidate their dominant position in the international market.
As mentioned above, it seems that mobile payments in the rest of the world are being oriented towards the use of NFC as a payment card emulator, although in some countries payment through QR has significant penetration. It seems that Apple and Google are going to bet heavily on QR payments in future versions of their Wallets for both retail and commercial payments.
As for other alternatives, Whatsapp is still taking small steps in the implementation of its payment platform through its mobile application. Whatsapp Pay has already been launched in some countries such as Brazil, although for the moment its functionality is limited to the payment of debts between individuals, and not in physical shops. In Spain, Bizum has in its roadmap the payment in physical shops by QR, although it will have to compete with the current mobile payment systems that are already consolidated among the Spanish population.
The particularities of the Asian market as well as the relationship of both companies with the Chinese executive make the international expansion of WeChat Pay and Alipay complicated. However, in the current international scenario, any option is possible.
What seems clear is that if in the near future we cannot pay in a shop or to a friend, it will not be because we do not have cash in our wallet, it will be because we do not have battery in our mobile phone. Instead of looking for an ATM, we will have to look for a plug.
Alfonso Suárez
Universia
Working with smartphones and payments. I have had adventures worldwide and love roller coasters. “Technology is a fundamental part of our daily lives, let’s learn live with it”.
