Trillions move through mobile wallets

Trillions move through mobile wallets

Fri, 13/04/2018 - 16:07

MARKET LEAD: George Lawson is spearheading the rollout of one of China's most popular payment systems in Australia and New Zealand. Photo: Alipay Australia


As recently as 2012, a retail transaction looked little different in China to anywhere else in the world – a consumer arrived at the checkout and reached into their wallet or purse to retrieve cash or a credit card to pay for their purchases.

In 2018, physical wallets are quickly becoming a relic of the past in China, as digital payments have become a ubiquitous part of life, to the extent that even beggars on the street use digital systems to obtain currency.

As with many things in China, the scale of the market is staggering – Chinese consumers sent around $US3 trillion through Alibaba Group and Tencent’s mobile payment systems Alipay and WeChat in 2016, according to a report by the United Nations-based Better Than Cash Alliance.

Alipay users sent $US1.7 trillion through the service in 2016, compared with $US70 billion in 2012, the report said.

Growth in transactions on WeChat also grew rapidly over the same period, from $US11.6 billion in 2012 to $US1.2 trillion in 2016.

At the same time, Chinese citizens have become increasingly mobile, with around 150 million of them heading overseas in 2017, with that number expected to grow to 200 million by 2020, according to international research organisation CLSA.

And with that movement, China’s cashless economy is spreading outside of its borders, as its travelling citizens increasingly request to use the same payment facilities abroad as they do at home.

In Australia, momentum for mobile payment systems is building rapidly, with retailers now lining up to offer Alipay and WeChat Pay to tap into an estimated $11 billion in Chinese tourist spending in the country.

The Australian rollout of Alipay, which has more than 600 million users, took a major step forward recently with the announcement of a partnership agreement with Australian payments provider Smartpay.

As reported by Australia China Business Review online, more than 25,000 retailers across Australia and New Zealand with Smartpay eftpos and credit card terminals now have the capability to enable customers to make purchases in Chinese yuan using Alipay Mobile Wallets.

The Smartpay agreement is the latest in a growing list of initiatives employed by Alipay to increase its exposure to the Australia and New Zealand retail sectors.

In 2016, Alipay was launched in Australia through a partnership with Melbourne-based Quest Payment Systems, with around 8,000 merchants currently offering the facility.

The Commonwealth Bank of Australia also signed an agreement with Alipay in 2016 to offer the facility to its clients.

Last month, Alipay announced an agreement with taxi payments giant Cabcharge, to offer Alipay in more than 20,000 taxis across Australia, while fashion brand Cue Clothing Company also began offering Alipay and WeChat Pay payment services in its stores nationwide.

Cue is using RoyalPay to offer the facilities, which is Australia’s first integrated cross-border payment solution offering both Alipay and WeChat.

Alipay Australia and New Zealand country manager George Lawson said the Smartpay and Cabcharge deals were a watershed moment for the company, with more than 50,000 devices across the two countries now enabled to accept Alipay.

Mr Lawson said Alipay was experiencing strong demand from pharmacies, food and beverage and luxury brand retailers to install mobile payment facilities, as well as airport duty free outlets across the country.

The latest data from Tourism Research Australia showed that in 2017 there were about 1.25 million Chinese visitors to Australia, who spent more than $11 billion.

In addition to travellers, Mr Lawson said the Chinese student population of around 400,000 in Australia were also keen users of mobile payment facilities.

“We will start to see more and more momentum pick up in market and that’s great for the Chinese consumer,” Mr Lawson told Australia China Business Review.

“Ultimately, I want to get to a point where they don’t have to guess whether or not Alipay can be used – they will know because it’s on every terminal.

“And when that happens, they will have a good experience, and when they have a good experience they say ‘I enjoyed coming to Australia and New Zealand’.

“Then that has a halo effect, more people come and that becomes good not only for the merchants but for the economy as well, and that’s really what I’m trying to drive.”

Mr Lawson said the popularity of mobile payment systems in China was not simply due to convenience, with the application’s robust coupon and loyalty offering resonating strongly not only with consumers, but also with retailers.

“When a merchant signs up for Alipay they can put coupons on the platform, they can be added to the wallet of the Chinese consumer, and the Chinese consumer can then go into the store and redeem it,” he said.

“What that’s essentially doing is saying to businesses ‘we can drive incremental traffic into your store and we can get customers to show interest before they actually come to market’.”

A recent white paper issued by Nielsen and Alipay indicated that mobile payment facilities were becoming increasingly important for retailers to capture spending, with more than 90 per cent of respondents to a Nielsen survey saying they would use mobile payments overseas if given the option.

Chinese tourists largely consider cash inconvenient and unsafe, the white paper said, with mobile facilities preferred for shopping, dining and visits to attractions.

Currently, about 65 per cent of Chinese tourists use mobile payments while overseas, with 77 per cent of respondents saying they spent more when mobile payment facilities were available. 

Spending by Chinese tourists has been increasing steadily in recent years, with Nielsen reporting that average spending while overseas reached $US5,565 in 2017, while forecasting 3 per cent growth in 2018.

“China has embraced mobile payments faster than any country and will continue to lead the lobal charge in this regard,” Nielsen China managing director Vishal Bali said.

“Mobile payment is on the rise globally and will continue to support greater connectivity and efficiency across the commercial ecosystem.”

Despite its popularity in China, and among Chinese travellers, Mr Lawson said he did not expect Alipay to develop an offering tailored for Australian consumers any time soon, due to vast differences in each country’s retail markets.

“In China, Alipay came into the market at a time there was a lot of friction in payments – you had situations where people would have to line up for hours on end to pay a utility bill,” Mr Lawson said.

“There was a very strong cash economy, so when you layered a digital service on top of it that allowed you to pay your bills really easily, to transfer money and to actually pay, it’s not surprising that it boomed in China at all.

“In a market like Australia, payments are not necessarily a pain point. I can tap and pay with a card or on a mobile, but the real benefit of Alipay is the value-add on top of the payment.

“It’s actually that loyalty, that coupon, that knowledge of the customer and being able to work with the merchant and create offers and things like that.

“That is the key to really seeing the move to complete mobile in Australia, and I think there are definitely opportunities to do that.”