By 2021, eMarketer projects that 79.3% of smartphone users in China will be swiping, scanning, and tapping at point-of-sale machines. Meanwhile, only 30.8% in the U.S. and 22% in Germany will be doing the same.
China’s Alipay exceeded 1 billion users with more than 700 million users in China alone, according to news reports. Additionally, more than 40 million small shops and sellers accept Alipay in China. Meanwhile, the WeChat messaging app has more than 1 billion active users, and it is estimated that 80 percent of WeChat users have used its payment service.
However, by the end of the last quarter of 2018, the U.S.-based PayPal reported just having 267 million active accounts around the world.
There’s no getting away from it, China is leading the mobile payment revolution in the world. Should it matter to the U.S. and what should the nation do about it?
Yes, the U.S. and other countries should pay attention. In a world, where banks need to keep up with the growing use of smartphone use and the rise of fintechs ready to pounce on the traditional bank landscape if they want to survive.
What Mobile Payments in China Really Mean
Its surge in mobile payments is more than just an underdeveloped country getting access to banking. China is a budding economic rival to the U.S. Watching what’s going on in China is proof that mobile payments can replace cards in other countries. The U.S. needs to think about the consequences that another payment process could have on their businesses and customers.
China’s business model is quite different from the one in the U.S. China transformed a social media platform, like WeChat, into a payment facilitator. On the other hand, the U.S. has solely focused on financial services, and made loyalty and social low priority.
Ways the U.S. Can Catch Up with China
Americans can start to change the way they think about privacy. The Chinese and their technology standards are much less rigid than those of Americans. For instance, the mobile platforms used in China rely on QR codes instead of the much more secure NFC technology used in the U.S. Considering other ways to use mobile platforms while keeping transactions secure will be the real difference when it comes to the U.S. making a real shift to mobile payments.
Also, Americans need to change their perceptions about mobile payments. Most still consider a credit card-based system better and safer, and they don’t give mobile payments the same credence.
In order to protect their business, banks need to put together a viable mobile payments platform that all banks can use and will easy for merchants to integrate. To stay competitive, banks also should begin a thorough review of how all wallets works, pricing, how they share data, and the latest consumer trends. Then, they need to take that information and create a strategy.
Even if mobile payments don’t explode in the U.S. like it has in China, it is important for banks to know how the ecosystems work. There will always be an interest in cross-border ecommerce. If they are unable to get what they need from U.S. banks, they will be forced to go elsewhere.
China’s mobile payments movement may not threaten the U.S. today, but it is only a matter of time before it makes some kind of impression in the future. The U.S. should do itself a favor and embrace it and learn from it.
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