I’m waiting in the checkout line of a modern clothing store on HuaiHai Middle Road. When I’m ready to pay, I pull out enough cash to cover the expenses. The girl looks a little surprised and walks 10 meters to a table on the side that has the only cash counter on this floor, to check whether my cash is real. This is the first time I felt that paying in cash is a thing of the past. All other customers use Alipay, an online payment app that lets you pay by presenting a scannable barcode to the person behind the checkout. Welcome to the world of Mobile banking and mobile payment systems in China.
Alipay (Zhi Fu Bao, 支付宝) is the most popular mobile payment app in China. It is connected to your bank account, which allows you to freely transfer money between your bank account and your Alipay account. Once your bank account is linked to Alipay, you can use it to pay in any store or restaurant that uses Alipay, even your local hole-in-the-wall or street cooker has a QR code. Next to that, you can also send money to friends, top up your phone, pay your utilities, order a taxi, order products on Taobao, make investments, and so forth. Alipay currently has a 53% market share in China, which is down from over 70% in early 2014.
Another well-known mobile payment system is Wechat Pay, owned by Chinese internet giant Tencent. Their payment system is integrated into WeChat (Weixin, 微信). Wechat pay currently has a 40% market share, up from 13% just a few years ago. This development is not limited to China itself.
Alipay and WeChat Pay have been a disruptive force in the payment industry in the last couple of years. When growth continues and the payment systems become more internationally acceptable, these two players could become industry leaders in a highly competitive field where there is only place for a handful of firms to survive.
WeChat Pay and Alipay are taking its cashless in-store payments global by connecting participating stores and restaurants in countries worldwide. With support for 9 different currencies, Chinese customers will be able to pay with their phone in connected department stores in London, Tokyo, New York, and so forth. The payment will still be converted back to RMB, so currently it will only be available for people who have a Chinese bank account linked to their WeChat Pay or Alipay account. While adoption of WeChat outside of China might be negligible at this point, the model can serve as a blueprint for other mobile payment systems that are integrated in popular messaging apps.
Author: Erwin Geenen
Source: Financial times
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