Alipay holds on to the Lion's share

By Meng Jing and Ma Si (China Daily) Updated: 2015-12-28 08:00

People enjoy a 85 percent discount by paying for their vehicle fuel with Alipay Wallets at a gas station in Shaoxing, Zhejiang province.[Provided to China Daily]

Analysts point out that gains for Internet giants could be bigger as consumer behavior data gathered from offline channels would enable them to boost online sales.

Yet, smartphone majors Apple and Samsung have jumped on the mobile wallet bandwagon. Through separate deals on Dec 18 with China UnionPay, the biggest bankcard association in China, they agreed to introduce near field communication or NFC-enabled payment systems for their users at brick-and-mortar stores across China in 2016.

Di Jin, an analyst with Forrester Research Inc, said, "But the improved (Apple and Samsung) user experience is not a competitive component to win in the mobile payment space."

Instead, ease of use, security and adoption levels at offline points－restaurants, supermarkets, hospitals, gas stations－will determine whether or not mobile wallets will succeed, she said.

Alipay, Tencent and Baidu said they face two big challenges: convincing brick-and-mortar businesses to adopt mobile payment tools and expanding their services to new offline points.

Alipay, which is run by Alibaba's finance affiliate Ant Financial, said it has a 3,000-strong team to persuade offline businesses across China to accept Alipay Wallet for payments.

Mobile wallets can also help transform offline businesses through use of big data, said Xuan De, who is in charge of payment solution development at Alipay.

For instance, ever since Carrefour China connected with Alipay, its average payment time has shrunk from 1 minute per customer to 15 seconds. "Apart from improved cashier efficiency, use of Alipay could bring offline businesses the advantage of shopping analytics, which could help improve their procurement and marketing decisions," said Xuan.

All this convenience costs no more than a tiny percentage of each transaction value for offline establishments. Another source of revenue for mobile wallet players is precious data on consumer behavior. Which is why, consumers do not incur any charges for using mobile wallets. In a sense, it is a data-for-service barter.

According to Xuan, Alipay has already been able to enlist half-a-million store partners. More than 900,000 taxis and private cars allow passengers to pay via Alipay Wallet. And 37,000 vending machines will accept Alipay Wallet payments by June 2016.

Tencent said it signed up more than 200,000 store partners by October. Baidu, whose Baidu Wallet is, relatively, a latecomer to the market, didn't reveal the number of its offline business partners.

Alipay Wallet leads for now. But Li Chao, an analyst with iResearch Consulting Group, said WeChat may soon challenge it. "WeChat has more than 650 million monthly active users while Alipay Wallet has about 270 million monthly active users. If WeChat can successfully turn half of its users into mobile payment users, it would make quite a strong competitor of Alipay Wallet."

In February 2015, WeChat teamed up with China Central Television's Spring Festival gala, the hours-long, widely watched program, and broadcast messages in between, urging its users among the viewers to link their debit cards to their WeChat accounts.

Millions who did received virtual red envelopes worth 500 million yuan in all from WeChat and its business partners. "About 200 million people have linked their debit cards to WeChat. The majority did that in the year 2015, prompted by the red envelope campaign," said Tencent.

So, earlier this month, Alipay retaliated by clinching a similar deal with CCTV for the next year's Spring Festival. Come the February 7 gala, it will send out virtual red envelopes during the CCTV broadcast. Alipay didn't reveal details of its deal, but market rumor is, it may have spent up to 269 million yuan.