In China, the question “Do you take credit cards?” has quickly changed to “Do you take Alipay? WeChat Pay?” Evelyn Chang, a writer for CNBC, indicates that as a foreigner visiting mainland China, she often found it difficult to complete basic transactions without some form of mobile payment app. (See also: Alibaba's Alipay Takes on Apple and PayPal With U.S. Expansion.)
As Chinese stores and services increasingly center around apps like Alibaba Group’s (BABA) Alipay and Tencent Holding Ltd.’s (TCEHY) WeChat Pay, mobile payment volume in the world’s most populous country has over doubled to $5 trillion in 2016, according to Analysys data cited by Hillhouse Capital.
Market Expected to Reach $45B by 2021
A relative lack of regulation and a less developed financial system has catapulted China ahead of the developed world in terms of its embrace of mobile payments. In a country where a running joke is that street beggars would rather accept mobile donations than yuan, Alipay accounts for 54% of the market, with WeChat Pay in second place with a 40% share.
The ruling communist party, which benefits from greater data collection due to the popularity of mobile transactions, has continued to push out Apple Inc.’s (AAPL) Apple Pay, which had a 1.8% share of the Chinese mobile payments market in the fourth quarter of 2016. As the middle class in China continues to mushroom, a growing number of tourists from the country travelling abroad have put pressure on other countries to adopt mobile payments. According to the regional head of Ant Financial Services, the number of stores accepting Alipay in Japan will double to 45,000 in 2017.
Hong Kong-based research investment firm CLSA expects mobile payment volume in China to skyrocket to 300 trillion yuan ($45.26 trillion) by 2021. “High mobile internet and ecommerce penetration, and an underdeveloped traditional financial market will drive growth,” wrote CLSA’s head of Asia Telecom and Internet Research, Elinor Leung. (See also: Why China Is Locking Out Apple Pay.)