Mobile payments are fast becoming the most preferred payment method for Chinese tourists abroad, according to a global research study by payment specialists, Cancan. The study revealed that the majority of surveyed consumers intends to use mobile payment instead of cash or cards when travelling overseas this year.
What is a mobile payment system?
A mobile payment, also known as a mobile wallet, is defined as any payment where a mobile device is used to initiate, authorize and confirm an exchange of financial value in return for chosen goods and services. Mobile devices include smartphones and tablets. Mobile payment is being increasingly used in place of traditional payment systems such as cash, credit or debit cards. This type of payment is popular because of its convenience and ease of use. Be ready to leave your wallet at home and use only your smartphone to perform your daily financial transactions.
Mobile payments are expected to increase
According to the study conducted by payment specialists, Chinese consumers are expected to spend more using mobile wallets like Wechat Pay and AliPay throughout 2017 and 2018 than in the previous years. The spending trends of Chinese travellers range from 393 dollars to 786 dollars and from 1,179 dollars to 1,572 dollars when spending on retail products during an overseas trip. Only 5.7 percent of Chinese travellers spent more than 6,000 dollars on a trip abroad.
A survey done by iResearch Global reveals that the transaction volume of Chinese mobile payments reached 10 trillion Chinese Yuan (US$ 1.45 trillion) in 2015 and is expected to reach higher in the coming years. The United States is nothing compared to China. The country stood at US$ 8.71 billion in 2015 and is still lagging behind in comparison to record-breaking China. Efforts made by Apple and Samsung to promote mobile payments in the United States were not as successful as expected. With such great figures in China, it is safe to say that the country has become the melting pot for mobile payment solutions.
Mobile payments are the number one option in China
When asked about their primary means of payment on holidays and trips abroad, 67 percent of Chinese people said they preferred to use mobile payments, and mobile payment accounts for around 41 percent of all transactions abroad. For half of those surveyed, around 30-40 percent of their transactions abroad were using QR code payment methods, while 34 percent of all surveyed said they pay for more than half of their Chinese retail purchases with their mobile wallets. According to Analysys data cited by Hillhouse Capital, mobile payment systems in China doubled to $5 trillion in 2016. This is expected to increase further in 2018.
Mobile payment is an integral part of Chinese consumer culture
With increasing number of mobile payment users in China, it is safe to say that this new payment method is now an integral part of Chinese consumer culture. The country has embraced mobile payment solutions faster than any other country. A professor of finance at Tsinghua University states digital payment developed rapidly in China thanks to regulators who encouraged its use. They are more supportive of the new payment method than any other countries. A study revealed that the high rate of mobile payment transactions in China is possible due to a combination of three factors – ubiquity of mobile internet, evolving consumer choices and advanced infrastructure. Chinese people use their mobile phones extensively to surf on the internet. According to research, China’s mobile Internet users account for more than 620 million, representing 90% of the country’s total Internet users. This has contributed to the success of mobile payment systems in China.
Furthermore, consumer preferences keep evolving and it is no exception in China. Chinese people want convenience while doing their transactions. Mobile wallets have enabled them to complete their financial transactions quickly and without any hassle. People in China are always ready to adopt and use different types of mobile payments.
Thanks to advanced infrastructure and widespread merchant adoption, mobile payment solutions entered the Chinese market without obstruction. Besides, the country already had a weak credit card culture, thus promoting mobile wallets further.
Convenience is the main reason for the increase
We live in a world where consumers have busy lifestyles, more distractions and conflicting demands. Nowadays consumers want fast and easy access to everything, including payments. The desire for ultimate convenience when shopping and paying for goods has led to the creation of mobile payment systems.
The reason for the increase in mobile wallet spending is mainly due to the convenience and ease of payment that come with mobile wallets. Tracking their spending real-time was a big concern for the majority of the respondents, and the mobile wallet gives them the ability to do so easily. In China today, it is normal for consumers to go for days without opening their wallets when spending, and they expect the ability to do the same when abroad.
Research and economists predict that 65% of all transactions will be settled via mobile payment systems by 2025. Cards will become more irrelevant than ever as consumers will shift away from the need to carry them.
There is a lack of awareness among consumers
However, some of the reasons given against mobile wallets were a lack of merchant availability and ignorance of the ability to pay even when the merchant offers it. Despite the massive launch of mobile wallets by major mobile and technology providers, the majority of consumers have not yet adopted the mobile payment systems. While there are several reasons to explain this, a lack of awareness is definitely to be blamed. There are no proper campaigns to educate consumers on the real benefits of mobile payment systems.
Furthermore, it is observed that consumers are not to be blamed. They are not standing in the way of adoption of contactless payment technology. Instead, banks and retailers need to make the appropriate efforts to encourage consumers to adopt contactless payments. They should be responsible for bringing this type of payment to their customers.
Security is a major issue
Even though mobile payment is more secure and convenient, consumers are skeptical about the adoption of mobile payment systems. Security is their major concern. It is still one the largest barriers that are preventing consumers from using the new method of payment. It is an era of both heightened technology and awareness of identity fraud as well. Many non-users do not want to adopt the new payment system because they fear that sensitive data could leak into the wrong hands. Moreover, there is a number of high-profile retailers whose customer data has been stolen previously. This has further increased the fear of customers, thus preventing them from placing their trust in the new system.
AliPay is the most popular wallet
Of all the wallets available, AliPay, Wechat Pay, and Apple Pay are the three most popular, with AliPay at the top of the list. More than 75 percent of merchants in China now accept this payment method, with reports of it accounting for up to 25 percent of merchant turnover. This has been mainly driven by customer demand, although many retailers appreciate how fast the transactions are, and attribute the increase in the volume of sales to faster payment transaction using mobile wallets. AliPay’s primary product is a digital wallet and has over 100 million daily transactions and over 520 million active users. Founded in 2004 by Jack Ma and owned by Alibaba affiliate Ant Financial Services, AliPay plays an essential role in e-commerce business in China including online payment, online retail, virtual gaming and financial services.
AliPay is the most widely used payment in China as there is an amazing range of advantages attached to it, such as innovative technologies, user-friendly services and multi-function payment features. It is not surprising that AliPay is called the PayPal of East in China. Furthermore, the latest version of the AliPay mobile application in 2015 has proven than AliPay is one of the most innovative apps, growing from being only a payment system into a one-stop portal for payment services.
WeChat Pay is another popular mobile wallet
WeChat Pay is a payment solutions that is integrated into the social and messaging platform of Tencent: WeChat. The application is named as ‘Wallet’ and it allows users to perform a wide variety of transactions. You can transfer money, perform all sorts of transactions on e-commerce websites, top up your mobile, order and pay for cabs, buy flight or train tickets, purchase movie tickets, and pay for bills. WeChat wallet is convenient, easy and safe to use. The application is designed solely for mobile payments. One of the most amazing benefits of WeChat wallet is you can instantly send money to your contacts even if they don’t have a bank account.
Loyalty rewards are better than before
Today, the customer is empowered. With a wealth of information and data at consumers’ fingertips, many brands are experiencing a significant decrease in customer loyalty. As the retailing world is becoming more and more competitive, companies are expected to find new solutions in order to attract customers. In a 2016 report, it is revealed that customers are interested in gaining rewards for every purchase they make.
Originally, the loyalty rewards associated with credit cards were the main reason for their preferred use overseas. However, with an increase in loyalty features being used by merchants worldwide, the trends are changing and customer engagement has increased. The ability to offer customer loyalty and other features is greater with mobile wallets and mobile payments than with any other medium due to the ability of merchants to send details direct to the wallet owner’s mobile device. Mobile wallet and retail apps offer an amazing selection of loyalty and payment features, thus improving consumer convenience and driving up sales.
Mobile wallet loyalty programs enhance brand loyalty
Mobile wallet loyalty programs such as digital loyalty cards, coupons, order delivery updates, boarding passes and event tickets are the optimal platform for improving brand loyalty. Research has demonstrated that 58% of consumers are already using loyalty cards on mobile devices to collect points and miles while 86% would like to access loyalty programs from their smartphones.
There are two main mobile loyalty solutions – mobile wallet-based programs, such as Apple Pay or Google/Android Pay and mobile app-based programs like the one offered by Starbucks or Neiman Marcus. Loyalty programs existed much earlier than smartphones. However, they were more complex and time-consuming. On the other hand, mobile wallet loyalty programs are simpler and hassle-free for consumers. The convenience factor is deeply integrated into the mobile wallet loyalty programs as well. With the ease of a click, swipe or tap, consumers can pay for services or even book their next trip from their mobile devices. This has contributed to improving customer experience. Enhancing customer experience and simplifying loyal program processes lead to greater brand loyalty, including additional return visits and favourable online recommendations.
Profit can come from mobile payments
Worldwide, merchants can definitely profit from the storm of the mobile payment revolution that is extending from Asia, and the focus should be on the Chinese consumers, according to the managing director of Cancan, Candice Koo. “If the overseas market continues to mirror China’s mobile payment growth and development, this will likely change over time. Loyalty and points programs in mainland China were slow to take off but are now informing an increasing number of merchant’s digital strategy, many of whom all have domestic WeChat official platforms,” she reported.
Companies that accept mobile payments are observed to be more successful and profitable than companies who don’t. A survey conducted by Ingenico ePayments, Oxford Economics and Charney Research found that the fastest-growing companies use mobile payment systems. For this reason, various banks have been investing in all kinds of mobile payment solutions for the last couple of years. The San Jose, a Californian-based payments company, has worked hard to expand its reach to new customers through partnerships and acquisitions, especially in mobile payments.
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