New players set to change Chinese mobile payment competitive landscape

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China has been one of the most dynamic markets in terms of mobile payment adoption and usage till date. Customer adoption towards mobile payments in terms of online shopping, bill payments or purchasing services has been significantly high. The major market share holder in this segment is Ant Financial Services Group owned Alipay, which is an affiliate of Alibaba Group Holding. Another significant player in this segment is WeChat Pay, owned by Tencent Holdings, which embraces around 20% market share. However, it is showing steady growth rate in terms of users due to increasing popularity of the social media platform associated with it. Both these players have also strategized towards global expansion by entering into partnerships with foreign players and merchants.

The mobile wallet market in China in terms of transaction volume is projected to reach 692 billion in 2021 from 230 billion in 2017; recording a CAGR of 31.7%.

However, in recent times, new players are emerging into this segment which pose to be a significant development in Chinese mobile payment segment especially after increased usage of smartphones. The year 2016 marked launch of many prominent mobile payment platforms such as Apple Pay, Samsung Pay, Huawei Pay and Mi Pay which are backed by leading phone makers.

Apple Pay was introduced in partnership with Union Pay which is a state-owned payment processing service provider in China. Initially, prospects of growth of Apple Pay were not very optimistic since it relied on NFC technology. However, within a short duration after its launch over 30 million bank cards were linked to the mobile wallet representing that one third of China’s smartphones supported NFC based payments. Also, partnership with Union Pay gave access to customer base of China’s one of the largest banks. Additionally, Apple Pay also partnered with popular retail merchants such as food delivery service Meituan, e-commerce platform JD.com and online travel agent Qunar for extending its reach within China.

Samsung Pay was launched a month after Apple Pay partnering with Union Pay as well but it also integrated Alipay into its e-wallet platform as part of its market expansion strategy. It also got backing from significant Chinese banks as well.

Largest smartphone company Huawei announced its mobile payment platform in March and was initially backed by Bank of China (BOC). However, by the time of its launch, 24 other banks had been part its platform. Its latest smartphone Huawei P9 even allowed direct activation of HuaweiPay through integrated fingerprint scanner.

Mi Pay was launched by one of Chinese highest value start-up companies Xiaomi in September, 2016 and has been linked with 20 banks and Union Pay. While parent company of Leshi Internet Information & Technology, LeEco, announced building of payment infrastructure in association with Beijing based internet finance and mobile payment think tank.

With all these developments occurring over a small period of time, two different strategies are prevalent in Chinese mobile payment segment. Country based players such as Alipay and WeChat Pay are diversifying their service line into different segments as well as expanding into foreign markets. Alipay is offering financial services through credit scoring system Sesame Credit, that tracks Alipay payment records and policies from Zhong An Insurance. It also provides loans to consumers depending on online purchase records. Even WeChat Pay offers investment products to its customers. On other hand, foreign international players such as Apple Pay, Samsung Pay and others are working towards increasing their foothold in Chinese mobile payment segment which is undoubtedly one of the largest markets for the global mobile payment. Alipay’s market share has decreased from 82% in 2014 to 68% in 2015 while Tencent share has closely doubled from 11% to 20% during same period. It is quite evident that new players are likely to increase competition in the market and anticipated to launch new services to draw in more customers.

To know more and gain deeper understanding of mobile payment industry in China, click here.