The future of payments has been the subject of speculation for some time. From headlines touting the death of cash, to the latest mobile wallets to cryptocurrencies, yet the real future of payments lies not in a service that seeks to change customer behaviour overnight but one that makes their lives easier.
In recent years, we’ve witnessed a fragmentation of payment methods along geographical lines. Thanks to consumer and commercial choice, technology availability and restrictions, and simple quirks of chance, payment methods that are wildly popular in one part of the world are unheard of elsewhere.
For example, in South Korea & Japan, online payments are often done using a bank transfer, rather than immediately when ordering. Often these payments are made using an ATM. In India, mobile wallets are far more popular than in many other countries, where they remain on the verge of taking off but haven’t quite made it. In China, mobile app services such as Alipay and WeChat Pay eclipse every other method of payment in a society that seems to have bypassed a reliance on cards.
Both Alipay and WeChat Pay services have invested time and money into expanding beyond China’s borders but have not yet seen the same levels of uptake as in their domestic market. Nevertheless, when looking at how mobile payments might progress in Europe, looking at China’s innovation offers valuable clues to how things may progress. Retailers looking to benefit from this innovation and capture the custom of those who are taking advantage of it need to look closely at those markets that are out in front.
China is undoubtedly the world leader in mobile payments, thanks to services such as WeChat aiming to be much more than the chat service than the name suggests. As well as the text messaging, voice calls and image sharing that many messaging services offer, WeChat users can use a Facebook-like service called Moments, register for credit cards and hospital appointments, and even use enterprise services. The app now has 889 million monthly active users, a third of whom spent at least four hours on the app. And the most successful move that the app has made is into money services – 92% of WeChat users use WeChat Pay.
These numbers far outstrip anything in Europe. In 2016 WeChat Pay processed $1.2 trillion in transactions, compared to the $354 billion that PayPal processed globally, and on all platforms. In total, mobile payments in China hit $5.5 trillion in 2016. While there has been some traction in mobile payments in Europe, it lags way behind what’s happening in China. One estimate from Forrester that describes mobile payments as about to ‘take off’ in Europe has the technology reaching $148 billion by 2021 — which pales into insignificance next to China, even when relative populations are taken into account.
Mobile payments in China have worked their way into ubiquity through providing consumers with a payment method that sits within something they already use. Taking WeChat Pay as an example, payments either take place directly from the WeChat app, or using QR codes scanned from within the app. For online payments on a desktop or laptop, scanning a QR code on the screen using the mobile device and entering a pin completes the transaction. This scanning is not limited to online payments. Market stall holders, for instance, can have QR codes ready to scan with a customer’s mobile device, making checkout simple and instant. [potential to insert image here]
SafeCharge has partnered with Tencent Holdings to bring WeChat Pay to all of its European retailers and while WeChat Pay currently has limited traction with European residents, there is one market where WeChat is currently incredibly valuable: tourism.
Smart retailers will see the potential opportunity this market holds. The number of tourists from China is increasing every year, with a recent Counter Intelligence study finding that by 2025, 90m Chinese tourists will visit Europe and that globally, they will spend over $255bn per year. And while tourism is very often about enjoying new cultural experiences, this doesn’t apply to payments. Even the most adventurous traveller visiting exotic locales will be far more comfortable when they are using a payment service they use at home. Being more comfortable means they’re far more likely to buy, and this comfort can be increased by making the price available in their own currency.
For European retailers, mobile payments may currently be a limited channel but WeChat’s story shows how quickly the technology can spread. The ubiquity of mobile and the instant availability of an app means that consumers can get onboard instantly. Retailers that have the ability to accept mobile payments will be ahead of the curve.
WeChat Pay’s efforts to expand outside China’s borders users will continue, and our recently announced partnership is a bold step into Europe. Any merchant that targeting Chinese tourism even a small part of their business will be well advised to adapt. And If $255bn in Chinese tourist spending a year is not incentive enough, the potential for WeChat Pay to successfully expand to non-Chinese users should be.