China's rapid uptake of mobile payments forcing businesses to adapt

Looking to get rich quickly, two young men travelled across China last month with a plan to rob three convenience stores in the wealthy coastal city of Hangzhou.

They bought knives, masks and an electric bike and in the early hours of March 27, set off on their heist, targeting busy downtown areas.

But, unfortunately for the robbers, the cash registers were bare. Across the three stores they managed to pilfer less than 1900 yuan ($362), not even enough to pay for their train tickets home. As the frustrated pair now contemplate jail time their tale of woe has become a signpost for the rise of China’s cashless economy and the rapid take-up of mobile payments.

Those registers were bare because Chinese consumers are more inclined to use their mobile phones when buying a drink at the convenience store, settling a taxi fare or splitting a restaurant bill, than they are to use cash.

Giants battle for control

This rapid shift in consumer behaviour has made China the largest mobile payments market in the world with transactions tripling to 38 trillion yuan ($7.2 trillion) last year, according to consulting firm iResearch.

And the country’s two biggest internet companies, Alibaba and Tencent, are now battling it out for control of this giant market.

Alipay, owned by Alibaba affiliate Ant Financial, is the incumbent due to the runaway success of the group’s e-commerce sites Taobao and T-Mall. However, Tencent’s, WeChat Pay is gaining market share due to the popularity of its messaging and social media app, which boasts 768 million daily active users.

“Alipay is still number one but WeChat, which is just so integrated, has come from nowhere and is rising fast,” says Mark Tanner, chief executive of Shanghai-based digital marketing agency China Skinny.

“From his public statements Jack Ma [the founder of Alibaba], is clearly concerned about the threat from WeChat.”

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Source: China’s rapid uptake of mobile payments forcing businesses to adapt | afr.com