If the financial industry wants to learn more about the potential impact mobile payments could have on the market, it could do a lot worse than look to China. The world’s second-largest economy is one of the leading markets for mobile payments, thanks to a young, tech-savvy population, widespread adoption of smartphones and a large range of players driving the market.
According to data from iResearch, China’s mobile payment transactions jumped by 64 per cent year-on-year in the third quarter of 2015, reaching 2.42 trillion yuan ($373.2 billion).
In the last few months, several new entrants have tried to grab a slice of this for themselves, with both domestic and international companies seeking to get involved. Already, established names such as Apple Pay are competing with local services such as Alibaba, and this is only set to increase as the number of users grow.
Huawei, Xiaomi among new players
A key reason for the boom in mobile payments is China’s rapidly-expanding smartphone sector. It’s estimated the country will have 563 million smartphone users by the end of this year – more than the entire population of the US and Brazil combined. And unlike many markets, it’s home-grown manufacturers that take the lion’s share of sales.
It’s unsurprising that these firms are getting involved in mobile payments. Number one Chinese smartphone maker Xiaomi has recently announced a partnership with UnionPay to develop a new mobile payment service for the hardware maker’s products that are expected to utilize NFC technology to make it easier to pay via mobile in-store.
It’s not the first manufacturer to go down this route. Earlier this year, Xiaomi’s biggest rival Huawei announced its own partnership with UnionPay to bolster its mobile payment offerings. And it’s not just domestic firms that are looking to take advantage of this demand.
South Korean manufacturer Samsung has also looked to enter the Chinese mobile payments market. Injong Rhee, head of research and development, software and services of mobile communications business, Samsung, commented: “We ultimately want to make Samsung Pay available to as many consumers as possible in China, so that everyone can have the opportunity to enjoy the simplicity, safety and convenience of this mobile payment solution.”
An everyday payment option
One factor that separates the Chinese mobile payments market from many other parts of the world is the widespread recognition and acceptance of the technology as an everyday payments solution.
Companies such as Alipay and Tencent have worked to embed mobile payments into applications such as social messaging tools that consumers are already using, so it is a natural progression for many consumers to make payments through their favorite apps.
As well as person-to-person payments, mobile devices can be used to pay for everything from utilities to travel tickets and lunch bills. And this could be set to increase in the coming months and years as the country actively encourages more merchants to accept the technology for online sales.
Warren Hayashi, president for Asia-Pacific at global payments outsourcing company Adyen, told the South China Morning Post recently that mobile solutions offer a much faster, more convenient option compared with traditional tools. And considering the impact of mobile is vital, whether firms are setting up dedicated solutions for this or simply streamlining existing online payment options.
“Merchants have to optimize payments for mobile devices,” he stated. “If you have ten steps in your checkout flow for mobile, the likelihood that the consumer makes it to the tenth step is increasingly low.”
The impact of mobile devices for both in-store and online payments in China could be a lesson for banks around the world when trying to encourage adoption of these services. The keys to success are simplicity, convenience and widespread merchant acceptance. Get these building blocks in place and consumers will be far more receptive to the technology.