In China online payments took off since 2009 and reached mass markets, triggering the release of third party non-bank payments provider regulations in 2010. With digital wallets from providers such as Alipay enjoying 500 to 700 million registered users, we’re talking very large mass markets here. Now the same looks set to happen in mobile payments. This blog shares Shift Thought analysis from our recently published “Digital Money in China” viewport.
Local mobile payments has been relatively slow to take off in China. Two standards existed, the international NFC 13.56MHzl standard, and a 2.4GHz standard developed for China. China Mobile working with China UnionPay chose SWP-SIM technology, China Telecom went with SIMPASS and China Unicom chose NFC. Not exactly a recipe for many happy consumers tapping to pay.
Now things are different. On December 14, 2012 PBOC released the technical standards for mobile payment in the financial industry. In this, 13.56MHz technical standards have been identified as mainstream mobile payment standards. There are 35 technical standards of 5 categories on mobile financial payment.
The question therefore is how much will this change things? Can this help NFC recover lost ground? Any chance of mobile shopping via mobile internet losing it’s crown? With 30 players licensed for mobile payments, of which only 3 are mobile operators my bet is that apps and remote payment, already having achieved lifted off, are unlikely to be beaten anytime soon. Where smartphones don’t work (as low-cost as they are in China), such as for the lower income groups, it is unlikely that NFC will fill the gap.
I believe local payment will diverge some more, before we see clear winners.An interesting example of divergence is the Alipay Wallet mobile app with an acoustic (sound wave payment) technology for local payment, currently being trialled in Beijing. Innovation from the online payment providers is likely to drive this market forward.
An example of transfer between Alipay wallets
The Chinese mobile payment market is estimated at $34 billion transaction value, and as of end 2011 there were an estimated 218 to 300 million users. The market is doubling in size each year and expected to be worth over $80 billion, with 441 million active users by 2015. NFC represents just 3% of the value.
Worldwide a milestone was reach in May 2011 when USA was suddenly lit up by mobile-centric launches of a number of wallets: Google, V.me, Amex Serve and others. Since then most of the wallets launched have gone multi-channel as we’d predicted. Now China is exhibiting a similar trend, although starting this time from online and then embracing mobile. It seems we won’t have the problem of explaining why we focus on digital money much longer. In China we now have digital wallets, over 700 million of them, going mobile and offline, and that surely is digital money!