• Jürgen Fazeny

Why Chinese Mobile Payment Players Are Happy with Slow U.S. Mobile Payment Adoption


Over the past few years, the Chinese mobile payment market has had explosive growth. Its volume, according to a recent Mercator Advisory Group research report titled Asian Mobile Payment Apps as a Way of Life: A Look at Alipay, Paytm, and WeChat Pay, is more than $5.5 trillion, 50 times greater than U.S. volumes. The two main players – Alipay, which launched in 2011 as a spinoff from Alibaba, and WeChat Pay, which launched in 2005 – have seen phenomenal growth. Alipay processed over $1.7 trillion in transactions in 2016, and WeChat Pay did greater than $1.3 trillion in transactions in that same year.

Reasons for this large and rapid growth have to do with the late entrance of these players and difficulties surrounding card network programs in China according to Mercator’s report. It was not until 2002 that China UnionPay was created to launch credit and debit card programs, but the network suffered because landline infrastructure was not robust. The rise of the internet provided the catalyst for the rise of these mobile payment players in the Chinese market. This cmbined with the falling cost of smartphones to open the opportunity for large proportion of the Chinese population to leapfrog over the cash-to-cards payment evolution and go directly from  cash to mobile payments.

Currently in the U.S., mobile payment adoption is slower than expected though slowly moving forward. The slow adoption may be due to perceptions of the benefit of payments via mobile apps. According to a recent Federal Reserve Bank study, 65% of consumers don’t see any benefit to paying with a mobile wallet. In addition, unlike the Chinese market, the U.S. market has long had the infrastructure to support a card-based payment system and the leap of the mass market to using a form of digital currency took place quite some time ago. So where much of the rural Chinese market gained access to digital currency for the first time, there was large perceived value in that technological enhancement. But U.S. consumers discount the technological enhancement and continue to look for additional value in the mobile payment option.

Another reason for slow mobile payment adoption in the U.S. is low merchant acceptance. According to statista, only 37% of merchants surveyed in 2017 already accept Apple Pay or PayPal and 29% accept Android Pay. This low acceptance rate causes a paradox in that users don’t adopt mobile payments because merchants don’t accept them and merchants don’t accept them because people don’t use them. Over time, as more and more individuals use mobile payments, this paradox should slowly resolve itself.

The more widespread adoption of the Chinese mobile payment players allows them to collect much more data on a larger scale on their users then the U.S. players collect. This larger data collection combined with the rise of AI and machine learning can give these Chinese mobile payment players a strong advantage since the data can be used to improve fraud prevention. As PaymentsJournal discussed with Kount on a recent podcast, players with the most data can build the best anti-fraud machine learning models. The combination of data and AI tools also can give these organizations deeper insights into user experience and shopping behavior. This can potentially translate into greater usage and greater merchant acceptance.

It will not be a cakewalk for the Chinese players to dominate in the U.S. mobile payment marketplace, however, since the U.S. market has many major players such as Apple Pay, Google Pay, Samsung Pay, and PayPal. This combined with the current political climate will make entrance into the U.S. market challenging for these Chinese players.

Alipay has already begun to roll out its U.S. strategy, and if you’re interested and learning more about it you can listen to a podcast where we discuss this topic with Alipay.

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Jürgen Fazeny

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