Shoppers reaching for phones instead of wallets
Print Edition
BEFORE an early afternoon meeting, Ni Jia decided to grab a quick lunch at the McDonald’s branch near her office in Xujiahui. It was the peak of the lunch rush in the downtown commercial area.
She walked directly to one of the restaurant’s self-service kiosks, bypassing long queues of customers waiting at the cashier desk.
She paid for her meal via Alipay on her smartphone, and even got a free snack thanks to the mobile payment.
Ni is among hundreds of millions of Chinese people now using mobile payment services such as Alipay and WeChat to purchase everything from food and taxi rides to haircuts and movie tickets. Seeing this fast-growing trend, businesses across the country — from multinational chains to tiny street vendors — have rushed to join this revolution.
McDonald’s was one of the first restaurant chains in China to offer a comprehensive range of mobile payment options, including UnionPay, Apple Pay, WeChat Wallet, Alipay, QQ Wallet and ICBC QR code. According to its Vice President of Communications, Regina Hui, cashless payments grew from 4 percent of all transactions to 40 percent in 2016.
Ni, a receptionist, opened her Alipay account about three years ago. She says she was quite late to the service compared with most of her friends.
“Before then I generally paid cash and always carried my credit or debit cards, until I attended a reunion dinner with my high school classmates,” she recalls.
They decided to go Dutch after the dinner, and most of her schoolmates took out their smartphones to pay with either Alipay or WeChat.
“I didn’t have much cash with me at the time, so I had to transfer the money later when I was back at home. At that time, I realized I needed a cashless payment app,” Ni says.
At the end of 2016, users of Alipay received a statement of their transactions for that year, and many were surprised by how much they had spent. According to data released by Alipay, Shanghai users ranked first for spending, shelling out an average of 148,000 yuan (US$21,466) per person last year.
“I was surprised that some people spent over 500,000 yuan last year through Alipay,” Ni says. “Some netizens are even joking that they need to record the names of these rich guys, just in case they need help one day.”
Ni received her own statement, which showed she spent about 80,000 yuan in 2016, about 40 percent of which went toward maternity and baby items. The 33-year-old Shanghai native is five months pregnant and expecting for her first child.
“The previous year, I spent more on dining out, clothes and food delivery; now the annual statement reminds me that my life’s direction is changing,” she says.
There are currently more than 450 million users of Alipay, according to data from the company, which showed a 6 percent rise in transactions last year, up from 65 percent growth in 2015. Average annual spending with Alipay is over 120,000 yuan per user among those born after 1980. Some 91 percent of those born after 1990 are also mobile payment fans.
“Many urban Chinese don’t even bother with credit cards; they prefer to pay by phone,” says Gu Yu, co-founder of a new payment app, Mileslife, who calls the current situation “a late development advantage.”
“China doesn’t really have a lucrative credit card system,” he says. “So Chinese just skipped credit cards and turned to mobile payment.”
Room to grow
Not everyone has embraced the mobile payment bandwagon though, despite the momentum behind the trend.
Daisy Shen, a 35-year-old housewife, only recently got on board with the mobile payment trend.
“To remember so many user names and passwords is very annoying,” she says of her initial reluctance, adding that worries about data security and the loss of her phone made her put off creating a mobile payment account.
“My friends always told me that I was paying more for things in physical stores compared with online shops. I’m like a fossil to them,” she says.
Shen’s mother was a bit more eager to join the trend — the 62-year-old opened an Alipay account last year, mainly to pay her water and gas fees.
“Now I don’t have to go to the bank or convenient stores and wait in the queues,” she says.
The elder lady is also happy to use her mobile phone to pay at restaurants and supermarkets.
“You know what I like most with mobile payment? The e-hongbao (on WeChat),” she adds. “I don’t need to prepare physical hongbao (red envelop). Just a click, you can send out as much lucky money as you want. So convenient!”
Research firm eMarketer estimated that retail sales on mobile devices in China rose 85 percent to around US$334 billion in 2015. That made China’s mobile payment market more than four times the size of the US market, the firm said.
For big companies like McDonald’s, the advantages of cashless payment system go beyond speeding up service.
“It provides us opportunities to identify customer profiles and leverage big data,” Hui notes.
McDonalds has also launched the McD Fan Club on Alipay, providing membership services and customized coupons for customers.
The next frontier for the industry is expansion beyond China’s big cities.
“Much of rural China still relies on cash. Despite China’s slowing economy, the huge untapped population of hundreds of millions of rural people represents a big opportunity for mobile payment companies,” says Mileslife co-founder Gu.
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