Scan the code of joy at checkout

Use of mobile wallets at offline stores is set to rise as both Chinese and international companies slug it out

Money can make the world go around, and when people see the chance to save some while paying bills, it can make them kick old habits like cash or cards, and embrace change in the form of mobile wallets.

That's what shopper Guo Cuiling, 55, did on December 12 at a supermarket in Beijing, to claim a discount of 50 yuan ($7.72) for users of Alipay Wallet, a mobile payment system backed by China's e-commerce giant Alibaba Group Holding Ltd.

The payment process using her smartphone lasted a few seconds. The cashier scanned Alipay's QR code on Guo's phone, and presto, her bank account, linked to her mobile wallet, was debited. Debit cards and credit cards can also be linked to mobile wallets.

"Paying via a smartphone is much more convenient than I'd thought. You don't need to reach for your purse or worry about small change anymore. The obvious downside is that I may overspend before I notice," she says laughing.

Like Guo, many other bargain-hunters used Alipay Wallet on Dec 12. The day is celebrated as the "12-12" shopping festival in China with massive discounts and coupons at restaurants, gas stations, malls, supermarkets, cinemas and what have you, offered by mobile wallet providers such as Alipay, Tencent Holdings Ltd and Baidu Inc.

In 2013, Tencent added a mobile payment feature to its messaging app WeChat, which is used by 650 million people in China. According to Alipay, the largest third-party payment provider in China, an Alipay Wallet user could have saved up to 500 yuan on that day.

Now that more and more consumers are taking to online payments, the next frontier for electronic payment players is to get people to use their mobile wallets for payments at offline points of sale.

The offline market has even greater potential, say analysts.

Statistics from iResearch Consulting Group show China's third-party mobile payment transactions in the July-September quarter were worth 2.42 trillion yuan, up 64.3 percent year-on-year.

Ma Tao, an analyst with the Beijing-based Internet consultancy Analysys International, says the majority of the transactions were generated by e-commerce. Alipay accounted for about 70 percent of online payments.

"In China, about 1 billion transactions are made offline every day. About 200 million transactions are made by cards and the other 800 million are made by cash," Shenzhen-based Tencent said in an email to China Daily.

"However," Ma adds, "the offline mobile payment market is still largely untapped in China. And because it is still an evolving market, it is too early to tell which company will be the top dog."

A huge market without a dominant player yet - that is what is luring more and more players into the arena.

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, says, "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 says.

Alipay, Tencent and Baidu say 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, says 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, says Xuan De, who is in charge of payment 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," says 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.

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 data on consumer behavior. That's 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 says 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, says 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," says Tencent.

So, in December, Alipay retaliated by clinching a similar deal with CCTV for the coming 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 sources say, it may have spent up to 269 million yuan.

mengjing@chinadaily.com.cn

(China Daily Africa Weekly 01/01/2016 page24)