Chinese social payments apps enter US market

Alipay has landed in the U.S. following its do-everything social payments competitor WeChat, who moved in last week, signaling the start of a payments arms race here.

Alipay, China’s dominant mobile payments company under Ant Financial, signed a deal Monday with First Data, the U.S. card processing giant, that will allow Chinese tourists in the U.S. to make purchases at its 4 million merchant locations using Alipay.

The expansion stateside follows that of Tencent Holdings’ WeChat, which announced its plans in February and arrived in the U.S. on Thursday.

“These consumers love to shop in the U.S. because they find items here they would otherwise not be able to find in China, and pricing that is much more affordable,” said Souheil Badran, president of Alipay North America. “Our focus will continue to be on enabling the Chinese consumer to use Alipay at U.S. merchants.”

Mobile payments still lag behind China, but growth is expected to top the Asian country in the next year, according to estimates.

To some degree, that makes Alipay a threat to Apple Pay, which has been ahead of its peers in monthly active users, but is leading a race people generally aren’t interested in. And its mobile payments peers, Samsung Pay and Android Pay, aren’t far behind. Many point the finger at retailers, who have been slow to get any systems and incentives in place to encourage consumers to pull out their phone instead of their cards.

By contrast, Alipay, WeChat and the concept of mobile payments is common to Chinese consumes and by now, probably pretty natural to them. China is a mobile-first country. In addition to making online shopping payments, transferring money and paying utility bills, WeChat and Alipay users can hail taxis, book hotels, buy movie tickets, make doctors’ appointments and book karaoke sessions top up their mobile phones from within the apps.

“Alipay is a lifestyle application platform offering not only payment processing but also financial services, social and commerce use cases,” Badran said. “Alipay is part of our consumers’ daily life.”

But the bigger problem for Apple is the lack of widespread consumer-to-business mobile payments uptake, not Alipay, Samsung Pay or any of it’s competitors. Bringing millions of mobile payments users — even if its Alipay that makes that happen — into millions of stores could be the push that U.S. consumers need to break old habits — taking out the plastic — and creating a new one, tapping the phone that’s probably already in hand.

CEO Tim Cook boasted numbers in the “tens of millions” with 450 percent year-over-year growth last July, the last time he spoke publicly on the subject. There are 4.5 million merchants in the Apple Pay network.

Meanwhile. Alipay boasts 450 million monthly active users, who now have access to four million merchants through First Data. There are more than four million Chinese visitors to the U.S. each year, Badran said. WeChat boats 650 million monthly daily active users.

“When First Data moves in a business it’s not an experiment,” said Ashish Bahl, CEO of Acculynk, First Data’s recently-acquired technology company that provides innovative debit routing solutions. “A lot of work has been done to make sure it works, it’s scalable and adoption is ready. Merchants are open to delivering new payment types to existing consumers and if we can get in the flow of consumer brands, whether they’re issuers or wallets, that’s really a good thing.”

To retain customers, banks are empowering them

Being a bank used to be simple. The branch was the main point of interaction with customers. Serving a captive clientele was fun and easy. Customers could demand a service with a smile, but that was the extent of value added services a bank would offer.

Those days are long gone. Geography doesn’t play as much a role as it did before the advent of mobile. Customers think of banks more as personal finance tools, rather than just a huge ledger keeping tabs on their money.

“Middle class Americans want to feel in control of their finances,” said Chris Cox, head of digital banking and VP mobile payment solutions at First Data.

According to a recent survey First Data conducted of bank customers, bank customers think of their banks as a cash flow management solution, empowering them to make better financial decisions. They demand their banks to ‘play nice’ with other financial institutions, incorporating third-party data, and providing information that is more comprehensive, insightful and actionable.

With high customer expectations, there’s low customer loyalty. Only 55.1 percent of bank clients said they are likely to stay with their bank in the next 6 weeks, according to the 2016 retail banking survey. Less than 40 percent said they will refer a friend to their bank.

In North America, 68 percent of customers aged 18-34 say they would welcome receiving Personal Finance Management offerings like a “safe-to-spend” analysis from their bank, according to Accenture. A near equal percentage say that receiving such a service would make them more loyal to their bank.

PFM

Customers demanded, and banks are starting to listen. Many banks now offer PFM solutions as part of their digital offerings either by building them in-house or by partnering with startups.

Deutsche Bank, for example, launched its PFM FinanzPlaner, developed by financial software company Strands. The banking software company also developed BBVA’s Mi Dia a Dia and has also worked with Barclays and BNP on similar products.

ING recently launched a slew of digital money management products. The bank added a forecasting feature to its mobile banking app in the Netherlands. ING in Spain launched a digital financial advisor called My Money Coach and a similar one was launched in France.

Barclays’ PFM solution is open even to non-customers, highlighting the importance of such an offering for customer retention and acquisition.

“Customers see banks as financial experts, with unique knowledge about them,” Cox concluded.

People expect their financial institutions to leverage that expertise and data to offer useful advice, ultimately making their lives easier.