Is the US ready for WeChat?

If you live in the U.S., “social payments” is relegated to Venmo and its emoji-powered money transfers. But compare that relatively thin offering to China's WeChat, the do-everything messaging app that is the cornerstone of Chinese digital life. WeChat lets users execute peer-to-peer payments, top up their mobile phones, pay utility bills and book plane, train and movie tickets or book a karaoke session – to name just a few things. If China is any indication, social networks and messaging services could be killer apps for money transfer; WeChat is already leading that movement. “WeChat is kind of a de facto operating system and has massive, massive usage,” said Sean Neville, cofounder and president of bitcoin wallet turned social payments app Circle. “There isn't anything quite like that in the West.” Just yet. But when WeChat, or a WeChat-like clone, finally hits the U.S., it’s going to look different. There's more competition in the U.S., so there will probably be a few players as opposed to one “winner.” And although the U.S. payments system desperately needs an upgrade – sending payments is excruciatingly slow and expensive – it works well enough; how much U.S. customers benefit from paying in new ways with new technologies doesn't yet outweigh trained behaviors that don't want to change. Worlds apart The U.S. and China are on opposite ends of the behavioral spectrum. First of all, China is a mobile-first nation. Mobile e-commerce took off there because its retailing landscape was weaker and less efficient 15 years ago compared to the U.S., said Michelle Evans,, global head of digital consumer research at Euromonitor International. Mobile phones brought people online that were previously cut out and now, Asia’s technology landscape has a really diverse portfolio of online businesses. The adoption gap between the different worlds is less about technology and more about the fact that people in China and emerging economies enter the social payments ecosystem without a pre-existing bias as to how they transact. “In an emerging market like China, digital technology became a lifeline, providing something consumers would otherwise not have access to,” said Evans. “In the U.S. market it tends to be more of a convenience plug.”

By contrast, the transition to chip-enabled cards in the U.S. happened a decade after it had in Europe. That was largely because retailers and banks didn't see the incentive to retrofit their point-of-sale terminals and issue new cards to customers.

And while the U.S. market is large like China’s, it has more competitors, said Evans. Alibaba is China’s dominant Internet retailer. Union Pay is its dominant card network. That's it. There are so many more players in U.S. retail and card issuance – and in social networking and messaging services. “There are so many different innovative companies trying to address payments from many angles,” said Warren Hayashi, president of the Asia Pacific arm of Adyen, a payment platform that provides technology for WeChat. Adyen alone has built more than 250 local payment methods onto its platform, he said. From conversational banking to conversational payments  China may be ahead of the U.S. but Circle’s Neville is betting message-based payments will go the same way regular text message conversations in that sending money to someone will be as easy and direct as sending that person a text. “Messaging on mobile is a killer app for money transfer,” he said. “If I send a message to you in Europe and I happen to be in Boston, the Internet doesn't really care," and there aren't any barriers to receiving that message. "That same thing will happen with money. That kind of behavior isn't perfectly natural or common yet in Europe or the U.S.” Circle launched as a bitcoin wallet service with significant backing from Goldman Sachs and the Chinese company IDG Capital. Last year it raised another $60 million from Chinese investors to continue expanding in China and in December it decided to refocus its efforts on messenger-based payments more broadly as it dropped its bitcoin exchange service. Messaging platforms for exchanging information like bank account balances and spending recaps have attracted a lot of investment in the last two years; customers spend more time in messengers now than single-purpose apps, investors say. Kasisto's MyKAI, which allows people to talk with their banks and make Venmo payments through Facebook Messenger, Slack and text messages, is perhaps the best example in the U.S. “In the U.S. it’ll happen naturally, using messaging,” Neville said. “Consumers use it to pay one another back, merchants will catch on, it’ll be a holistic development that occurs. There are more people sending messages and sending other content through messaging. It’s an emerging organic behavior.” How this manifests in the U.S. It's not unlikely to see social payments take off in the U.S., but it'll look different than China's WeChat model. WeChat had the opportunity to establish a very strong leadership position if not a monopoly, but that leadership will be more distributed in the U.S., said Josh Sutton, head of artificial intelligence at Publicis.Sapient. The first step will be industry consolidation in processing. "Payments processing will standardize very similarly to how the credit card industry is standardized today: on a common backbone in a common ecosystem," Sutton said. "Mobile payments initially will drop out of that existing ecosystem... There’ll be the First Datas of the world that help to centralize and consolidate. There’ll probably be another tier of companies that provide different flavors of payment – you already see that with Square and Venmo. Then you look at how that gets integrated into different solutions, and that’ll be wide open." The consolidation has begun. Social networks are already starting to morph into one another – suddenly it seems all of them have their version of Snaps, Stories or Moments – and what once distinguished one from another is starting to blur. At the same time, those networks will begin to bring different brands and payments companies onto their platforms if they haven't already that may start in emerging economies – just last week, WhatsApp, which is owned by Facebook, announced a payments push into India – and then make their way the U.S. and Europe. "You see social payments trying in the U.S.," Evans said, "but you don't see the same uptake."