Social payments in China now reach almost $3 trillion, according to a United Nations report released Wednesday.
China has been a world leader in mobile and social payments while the U.S. and Europe have been slow to adopt them. Payments on messaging and e-commerce platforms like WeChat and Alibaba are set to increase China’s GDP by $236 billion by 2025.
Now, the United Nations' Better Than Cash Alliance is hoping other countries can emulate China's models as much as possible, if only to unlock economic opportunities for people and small businesses the way China has.
"While China is a very specific country study, it does give us insight into some changes in behavior starting to happen across the global consumer segment, specifically regarding how people make payments," said Camilo Tellez, head of research for Better Than Cash Alliance. "This ecosystem that has grown in China in an insular way has shown how we can take advantage of these social platforms and really use them to reach economics of scale."
China learned early on what many financial startups and institutions are just starting to integrate into its own financial system: the keys to success include building payments services existing e-commerce platforms and social networks to draw new customers, making platform tools like application programming interfaces openly available to innovators for seamless integration and enabling universal access for users and businesses by developing ecosystems that function across various platforms, according to the report.
Here are five charts from the report that show the success of WeChat, Alipay and China's payments market.
Alipay and WeChat absolutely dominate mobile payments. WeChat payments rose to $1.2 trillion in 2016 from less than $11.6 billion in 2012. That's an 85-fold increase in four years. Combined, Alipay and WeChat payments rose to about $2.9 trillion in 2016 from less than $81 billion in 2012.
WeChat payments are growing faster than its original messaging service. The Tencent subsidiary launched in 2011 and introduced its payments functionality in 2013. WeChat grew its active daily user base 43 percent to 806 million in 2016 from 195 million in 2012.
The rise of Internet and mobile phone use in China has had a lot to do with this. China's shift to smart phones took place over the course of the last five years, according to the report. Mobile payments capabilities existed for most of that time, whereas in the U.S. and Europe, customers became heavily dependent on their phones before being introduced to that function.
Integrating payments into WeChat has fueled its growth. In 2015, Alipay had 450 million monthly active users each spending $2,921 on average. In the same year, WeChat had 697 million users whose average spend was $568 on average and grew 168% to $1,526 in 2016.
Tencent's partnership strategy allowed WeChat users to pay for basically anything – beyond just peer-to-peer payments – by establishing relationships with vendors and merchants which sometimes offer promotions for WeChat users in physical stores. Customers can use WeChat to top up their mobile phones, pay utility bills and book plane, train and movie tickets. You can even book a karaoke session with WeChat.
Cards are still king. Despite impressive growth over a short period, just 12 percent of payments are done on mobile devices in China compared to 16 percent online, 30 percent in cash and 41 percent with cards. The sheer scale of the Chinese market, however, means these numbers get pretty big.
China UnionPay, the main domestic payment card clearing and settlement system, as 26.7 million merchants with electronic point of sale devices installed for card payments. Debit card penetration stands at 3.1 cards per person – and is increasing, according to the report. Although, every new POS device sold in China is required to come equipped with near field communication technology for mobile payments. Meanwhile, the U.S. has been in a chip versus stripe cards debate when most of Europe implemented chips a decade ago.
Integrating payments into WeChat has fueled its growth. In 2015, Alipay had 450 million monthly active users each spending $2,921 on average. In the same year, WeChat had 697 million users whose average spend was $568 on average and grew 168% to $1,526 in 2016.
Tencent's partnership strategy allowed WeChat users to pay for basically anything – beyond just peer-to-peer payments – by establishing relationships with vendors and merchants which sometimes offer promotions for WeChat users in physical stores. Customers can use WeChat to top up their mobile phones, pay utility bills and book plane, train and movie tickets. You can even book a karaoke session with WeChat.
Cards are still king. Despite impressive growth over a short period, just 12 percent of payments are done on mobile devices in China compared to 16 percent online, 30 percent in cash and 41 percent with cards. The sheer scale of the Chinese market, however, means these numbers get pretty big.
China UnionPay, the main domestic payment card clearing and settlement system, as 26.7 million merchants with electronic point of sale devices installed for card payments. Debit card penetration stands at 3.1 cards per person – and is increasing, according to the report. Although, every new POS device sold in China is required to come equipped with near field communication technology for mobile payments. Meanwhile, the U.S. has been in a chip versus stripe cards debate when most of Europe implemented chips a decade ago.