China’s mobile payment market is the biggest in the world with over US$5 trillion in mobile payments processed in 2016. The advent of QR-code payments in 2011 contributed significantly to this growth and enabled a new channel for mobile payments to grow to what they are today. But the integration with ‘social’ is becoming increasingly important.
The mobile payments market has largely consolidated around Alipay and WeChat Pay, two platforms that are continually integrating new products and services around the basic payments functionality to create complete ‘lifestyle platforms.’ Today, on either Alipay or Tencent’s WeChat Pay, beyond payments, you can use the platforms to book taxis or flights, buy wealth management products or movie tickets, and any number of diverse products and services available on the platform and through social channels.
The first usage of ‘social’ connected to mobile payments was Tencent’s 2014 Chinese New Year ‘red-envelope’ campaign. Essentially, Tencent digitized the traditional custom of giving cash-stuffed red-envelopes and over Chinese New Year 2014, millions of people around China sent digital red-envelopes to friends and family through the WeChat platform. To open the envelope, recipients needed to add their bank card to the WeChat platform. Not only did this increase the usage of WeChat Pay, but it also reinforced the confluence of social and payments.
In 2015, WeChat incorporated a ‘split the bill’ function. The usage case was simple: you are at dinner with friends and the bill comes. Rather than each person putting down their card, one person pays and then enters the total bill amount on their phone, everyone else shakes their phone to be part of the transaction and the bill can then be automatically shared amongst all the people at the table.
The social usage cases have also become more integrated. Recently, a friend was going on a trip with a co-worker. Rather than book the flights from scratch, she asked the co-worker to send flight details through WeChat. The colleague shared the details and without leaving the WeChat app, the friend was able to book tickets directly—a nearly seamless integration of social and payments.
The most noticeable industry impact of this focus on social has been the growth of WeChat Pay from about 5 percent of the mobile payments market in 2013 to nearly 50 percent in 2017, a clear indication of the importance of social in driving mobile payments. If you can chat with friends, book flights and pay merchants all within WeChat, why would you use anything different?
The importance of this holistic approach is being even more critical as data becomes a differentiator. All of these payments are generating an incredible amount of transaction data which will be an important part of what comes next for the industry. Being able to better capture, analyze and action data will be essential as the payment platforms seek to differentiate their value propositions, a key part of which will be social.
Although mobile payments are already widespread in China, we are only at the start of what will likely be an extended period of development as payments become more seamless and embedded in everyday activities. Social has already proven itself to be a key differentiator and this will only increase as integration and big data open up new possibilities and value propositions for the mobile payment players.
|Zennon Kapron is managing director at financial industry consultants KapronAsia in Shanghai.|