The Status Quo of Mobile Payments
Worldpay, a UK-based payment processing company, has issued a report announcing that the total value of e-commerce transactions worldwide in 2015 rose to 1.66 trillion dollars, with approximately 23% of those purchases being conducted through mobile payments services. Tang Kok San, VP of Business Development for Worldpay in China, predicted that electronic payments –particularly from digital wallets on smartphones– would surpass credit card transactions by 2019.
“The first age of digital payments kicked off with the eCommerce boom in the early 2000s when companies like PayPal and AliPay introduced eWallets to the mainstream,” Tang said in the report’s press release. “The second phase coincided with the rise of the smartphone at the beginning of the decade, and we’ve since seen a proliferation of new mobile apps that quickly raised the bar for convenience in payments.”
According to the report, as the internet and mobile technologies have become more widespread throughout China, consumers have shown more confidence in online purchases. “Compared with Indian, American and British consumers, Chinese consumers buy more e-books, music files and digitized films,” the report said. “At the same time, China’s ‘Internet Plus’ policies will further encourage the growth and development of the country’s digital marketplace over the next few years.”
This explosion in online sales has been a boon for payment transaction processors. According to figures from the China Academy of Telecommunications Research, transaction fees earned by payment processors in China will exceed 850 billion RMB (131 billion dollars) in 2015, up 34% from last year. Worldpay also predicts that this rapid pace of growth will continue with Paypal, AliPay and other eWallets outstripping credit cards within five years.
The research also revealed that Chinese consumers are much more cautious towards subscription services due to concerns over digital information security and often prefer alternative payment methods.
“When it comes to online content, Chinese consumers prefer to make one-off purchases and only try out subscriptions services,” Tang told hexun.com, a business news website. “Considering the rapidly-increasing demand for ebook, music streaming and video content subscription services, companies and vendors that can provide the most flexible payment methods will attract more customers.”
How do Chinese Consumers Feel About Mobile Payments?
Compared with consumers in other countries, Chinese online buyers are more concerned about sharing their personal data. Around 25% of all global consumers have concerns about their digital privacy, but for Chinese netizens, that number jumps to 40%. This is one of the reasons why they are reluctant to embrace subscription services, Worldpay’s report said. But these concerns seem to center primarily around the safety of credit card usage. One in seven Chinese online consumers is worried about their private data being lost or stolen when making a purchase with a credit card online.
This leaves a large opening for programs like AliPay and WeChat, which are leveraging their brands’ credibility to sell their online payment services. Alibaba’s AliPay facilitated transactions worth over 500 billion dollars last year, while Tencent’s WeChat Payment has earned just over a 10% domestic market share (vs. AliPay’s near 80%).
Some Food for Thought
While Chinese consumers continue to eschew credit cards, another obstacle is standing in the way of more widespread eWallet adoption: the tyranny of choice.
“[W]ith so many options being rolled out so quickly, a sense of app fatigue has begun to set in leaving both consumers and merchants unsure of which approach is best and questioning the convenience of using multiple eWallet,” said Worldpay’s Tang. “I expect the next few years will see a consolidation of the market as the public hones in on their preferred payment methods and conscientious merchants feel more confident buying into technologies that their customers have already embraced.”