China is living the future of mobile payment right now

Mobile payment takes China by storm and changing daily commerce.

The transformation from a company limited to invoices denominated in 100 yuan ($ 15) or less into a company where QR payment codes abound has been by far the biggest change in mainland China since my last visit four years ago.

When eating out or shopping with local friends, they paid by scanning a QR code on the restaurant table or showing a similar code on their smartphone to the store clerk. A spice shop, museum souvenir shop, and traditional Chinese calligraphy brush vendor all had signs saying they accepted mobile payment.

Rather than “do you take credit cards?” The question was often “Do you take Alipay?” WeChat Pay? The common joke was that beggars on the street preferred to receive a mobile donation rather than cash.

An employee at a dessert store scans a QR mobile payment code in Beijing, China, while the blue sign below promotes the store’s use of Alipay.

Evelyne Cheng | CNBC

The lack of bureaucracy and a less developed financial system have apparently allowed mainland China to overtake the developed world in embracing mobile payments.

The volume of mobile payments in the country more than doubled to $ 5,000 billion in 2016, according to Analysis data cited by Hillhouse Capital in a May report. In the first quarter of this year, Alipay held 54% of this mobile payments market and WeChat Pay 40%, according to the study.

The Chinese habit of mobile payment is affecting other countries as well. More than 6 million Chinese traveled abroad during the national holiday of “Golden Week” in early October, according to state-backed media Xinhua. This puts pressure on popular tourist destinations like Japan and Hong Kong to add mobile paid services.

Just across the border in Hong Kong, I heard a few mainland Chinese customers asking a salesperson to scan their phone’s QR codes while Cantonese-speaking locals paid in cash. In April, Nikkei reported that the number of stores accepting Alipay in Japan to double to 45,000 this year, according to the regional manager of Ant Financial Services.

Customers can purchase traditional Chinese calligraphy brushes at this store in Xi’an, China using QR payment codes. From left to right: WeChat Pay, Alipay and the store’s WeChat account QR code.

Evelyne Cheng | CNBC

The growth of mobile payment in China comes from a strong base of smartphone users. Chinese tech giant’s ubiquitous WeChat messaging app Tencent reached 963 million monthly active users in the second quarter. In professional circles, the addition to WeChat sometimes replaced the exchange of business cards.

Alipay, which belongs to Ali Baba affiliate Ant Financial Services has 520 million users, according to its international website.

The application is linked to the Yu’e bao online money market fund, encouraging users to invest and spend with Alipay. Attractive interest rates of nearly 4% or more have made it the world’s largest money market fund, with 1.43 trillion yuan ($ 217 billion) at the end of June, according to state media quoting Yu’e bao director Tianhong. Asset Management.

Hong Kong-based research investment company CLSA expects Chinese electronic payments volume to quadruple to 300 trillion yuan by 2021. During this period, assets under management of products Wealth Management Online is expected to triple to 6.7 trillion yuan, and online lending may also triple to 3.5 trillion. said Elinor Leung, head of Asia Telecom and Internet Research at CLSA.

“The high penetration of mobile Internet and e-commerce, as well as an underdeveloped traditional financial market will drive growth,” Leung said in a September 5 report.

Mobile payment is growing so quickly in mainland China that as a foreigner I have sometimes struggled to do basic transactions without it.

After scanning the QR code on the table at this restaurant in Beijing, China, customers enter the payment amount into the app.

Evelyne Cheng | CNBC

When I tried to pay in a Beijing Mcdonalds late at night, the only payment options were the Chinese credit card system Union Pay, Apple Pay or WeChat Pay and Alipay. As an American visitor without a Chinese bank account, I couldn’t find a way to use these systems and the store clerk wouldn’t take my money.

“Cash is accepted at all McDonald’s restaurants in China. After our investigation, we believe this to be an isolated case that occurred during the night shift change, and therefore all counters have been temporarily closed, ”a McDonald’s China customer service center told me in an email.

Taxis were also nearly impossible to hail in Beijing due to the rise of Didi, a ridesharing app that bought out Uber’s operations in China in a deal worth $ 35 billion. last summer. Because Didi was linked through WeChat, I couldn’t use it without a Chinese bank account.

When I finally got a taxi, the driver gave me a fake 50 yuan currency bill. Several stores also claimed that three of my 100 yuan bills from a New York bureau de change were counterfeit. If I could participate in the cashless society, I wouldn’t have lost around $ 50.

The bike unlocks after the customer scans their QR code through a bike sharing app.

Evelyne Cheng | CNBC

The growth of mobile payment in China has supported another activity: bike sharing.

Led by a few start-ups, the number of bicycles stacked along the street or sometimes even strewn along the highways in China has exploded. The number of monthly active users doubled from February to more than 20 million in March, according to TrustData as cited by Hillhouse Capital.

Two of the biggest China-based start-ups, Ofo and Mobike, say they have more than 13 million bikes globally and have each raised at least $ 1 billion.

Incidentally, Mobike entered the United States on September 20 by deploying bikes in Washington, DC, while Ofo made its first foray into the country by launching in Seattle in August.

A bike from the bike-sharing startup ofo in the Muslim quarter of Xi’an, China.

Evelyne Cheng | CNBC

The dominance of mobile payment also means companies like Ant Financial and Tencent have access to hordes of personal data. This data can then be shared with the Chinese government, which favors control. Some regions in China have tested a personal credit score system linked to mobile payment data.

But unless privacy concerns have immediate negative consequences, convenience can trump everything. A smartphone is increasingly the only thing a person in China needs to get out.

Disclosure: Travel to Asia was supported by the East-West Center, the Better Hong Kong Foundation, and the All-China Journalists Association.

A worker at one of the many food vendors in the Muslim Quarter of Xi’an, China.

Evelyne Cheng | CNBC

About Dawn Valle

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