It is time for lunch in Shanghai, just like every day I go out with my coworkers, we just ended lunch, the bill comes, I don’t have my wallet with me, someone pays, I ask her how much it was, ¥35 each (~5 USD), I open WeChat, look for her profile, click on transfer, and that’s all.
This is an everyday situation in China. You don’t need your wallet anymore, you don’t need to go to the ATM to get more cash, you don’t need to break that big bill in your wallet unless you want to. You just need to have your phone, ask if they accept 微信 (WeChat) or 支付宝 (Alipay), open the app, scan and pay with your electronic wallet or directly deducted from your bank account. More than 50% of daily money transactions in China are made using one of these two platforms.
- Alipay (支付宝) is the biggest contender in the cashless payment market in China, with more than 400 million registered users doing micro-transactions every day. The service owned by Alibaba Group is the biggest mobile and online payment system in the world. Anyone in China with a valid ID card or passport, and a bank account can create a profile and buy things in virtually any place in China. Created in 2004 the technology isn’t new, but it has gained popularity with the growing Chinese mobile market.
- WeChat Pay(微信) is the second biggest mobile payment company in China, with around 300 million users. Tencent Technologies is the owner of the biggest messaging app in the world, WeChat has over 800 million monthly users (more than 90% of them in China). The wallet function was a way to take advantage of the already huge user base the platform held. Introduced in 2013, the main advantage over Alipay is that it takes advantage of your WeChat profile and lets you send money to any of your contacts.
Both systems work under the same premise. You have your digital wallet that holds your money, you can either use the money directly from your wallet or deduct it from your bank account. You can connect your card from almost any registered Chinese bank (and some foreign credit cards as well); in order to transfer it to your friends, pay establishments, services, movie tickets, etc.
Once you try the services by yourself, you start to wonder why this hasn’t reached Western markets yet. It’s the easiest way to buy things without carrying cash, it’s easy for paying the bills at restaurants or bars with your friends (one person pays all and at that moment everyone transfers their part using these apps).
If you are thinking, “So, it’s a Chinese PayPal” you are wrong. What PayPal offers is just a small part of what you can find in these apps. Alipay and WeChat offer not just money transfer or payment in stores, you can pay your rent, house services, book flights, hotels or trains, buy movie tickets, ask for a taxi, pay for your gasoline, give red packets (hongbaos) in Chinese New Year, ask for a loan, rent a shared bike, order food for delivery, buy clothes, open a saving account, split bill easily within a group with a list of who has paid and who has not, add money to your phone service, hire a cleaner, pay your credit cards, and more things that I’m personally not aware of!
Why did mobile payment became so popular in China?
- Government support. It’s well known that the Chinese government always tries to support the national companies over possible foreign contenders, this happened to Visa and MasterCard when they tried to compete against China UnionPay, the most popular bank card system in the country. Alipay was a revolutionary idea that got good support from the government as it was an easy way to have control over the transactions made in the country. In order to register as a vendor in Alipay you need to pass through a long process of providing legal documentation of your company. Also every user is registered with their Chinese ID card or Passport (for foreigners) so the registration of each user transaction is easy to access for the company and government.
- Cash. China’s biggest bank note is ¥100 (~14.5 USD), so handling big amounts is complicated, and I really mean it. Imagine paying rent in Shanghai, which usually goes from 12,000–15,000 in downtown, with cash. That’s 120 bills for one month. Using such a low-value banknote makes looking for an alternative a necessity, that’s where UnionPay, Alipay and WeChat entered the game.
- Convenience. It’s easy, period. That’s the most important thing for mobile payment, you can do it fast, in a secure way and everything is registered if you need to complain.
- Popularity. More and more stores are going cashless as well, sometimes it’s almost impossible to pay with cash and mobile payment is the only way to do it. In the big cities it’s hard to find a place that doesn’t accept one of these services. So it’s the easiest way to be sure that you can use your money.
- Security. You cannot get your account cloned, you need to input your 6 digit key or go through TouchID in order to make a payment, you can see the exact amount that’s going to be deducted from your account, you have the information of the person who took your money. Nowadays it's the most secure way to do transactions in China.
As a foreigner I’m fascinated by Alipay and WeChat, it's by far one of the best things that you can find in China. It’s easy for paying when you don’t even know the numbers, it’s as easy as just scanning the QR code or being scanned by the vendor and that’s all, I can transfer the money of my rent to my flatmate without any trouble, I can ask for money and then pay it back easily. It’s just really convenient.
While China isn’t still the biggest cashless market, the country is moving towards a cashless culture that you can’t find anywhere else. It’s just a matter of time to see China as the leader in cashless payments.
For the moment, we can see how Western apps try to implement the same service, who knows? Maybe the international version of Alipay is just waiting to be discovered.