Within a few years, China was able to make the transition to an almost cashless market. Meanwhile, the Chinese pay the majority of purchases using the smartphone. FinanceFWD has investigated how the Chinese Internet companies have managed to establish mobile payment in the country of the middle. In addition, the study shows why German companies should also take a look at the trailblazer. However, the question also arises as to whether the previous revolutions in China favored this development. This conclusion is obvious, as Western countries have so far barely focused on the revolutionizing of payments. Especially the competition between China's two largest technology companies, Tencent and Alibaba, is making rapid progress.


The desktop web never arrived in China

The revolution in payment behavior in China can be traced back to 2004, when Alibaba began to develop Alipay. This early development quickly helped the company to become market leader. Especially in e-commerce, the company relies on a fast and at the same time secure payment method. Above all the bad service of the state banks as well as a bad adaptation of credit cards ensured that alternatives had to be developed. That's why the company quickly turned to mobile payment solutions. In addition, economic development provided another benefit for the company, as many Chinese households never had their own Internet connection, let alone their own computer. Thus, the smartphone was often the first point of contact to the Internet.

Alipay now has over 520 million users and can thus secure its market leadership in the area of ​​mobile payment. The developing company, Ant Financial, has been spun off the Alibaba group and is considered the world's most valuable fintech with a market capitalization of approximately $ 150 billion. But with the popular app WeChat is developing a serious competition. The app now has over a billion users and has an integrated payment function.


Tencent uses Chinese tradition for the New Year celebration

Behind the development of WeChat is the Chinese group Tencent, which entered the mobile payment market comparatively late. But in 2014 it became clear that the company understood the market. For example, Tencent uses the Chinese New Year, when family members give each other money in a red envelope. In 2014, Tencent introduced an in-app feature that allowed money to be sent in a virtual red envelope. This feature aroused the interest of the Chinese and within two days, around 40 million transactions were made with a corresponding red envelope. To perform this function, millions of users have paired their bank account with WeChat. In addition, the competitor Alibaba was trumped in terms of innovation.

Above all, this marketing coup ensured that even older generations found their way into mobile banking. But Alibaba used the coming New Year's party to fight back. In addition, cash coupons worth 100 million US dollars were distributed to the users. Nevertheless, the company reached only a quarter of the transaction volume of the competitor Tencent. The reason for this was not the low interest in the function, but the clever marketing of the Tencent Group. The company used the state television's classic New Year's TV gala to encourage people to shake their smartphones. In return, red envelopes populated the users, which totaled 500 million yuan. This corresponded to around 80 million euros. All money was distributed to all users.


New payment function based on biometric data

Alipay and WeChat now have approximately the same market share in mobile transactions. Thus, a large part of the Chinese uses mobile payment in everyday life. Mainly QR codes are used, which are common everywhere in China. But some companies, such as KFC and some Alibaba supermarkets, now rely on face recognition. For example, Alibaba uses a self-developed system called "Smile to Pay", which records the biometric data of the user and activates it with a smile. So it is hardly surprising that many Chinese people find the payment methods in Germany to be antiquated. Overall, Chinese tourists are considered fast growing and above all lucrative customer group. For this reason, an adaptation of appropriate payment options would be quite a sensible step. Already in 2017, Chinese tourists spent an average of three million times in Germany. In addition, the average daily expenses were around 450 euros. For 2030, the experts are already expecting five million overnight stays a year.


Germany begins with the adaptation

German payment companies have recognized the trend of mobile payment as well, as illustrated by the payments provider Wirecard. The company has been cooperating with Tencent and Alibaba for years. In addition, WireCard is considered the company that brought WeChat to Europe. In the meantime, WeChat can already be used occasionally at the point of sale (POS). Companies such as Rossmann, Munich Airport and Breuninger are already accepting the payment functions of WeChat and Alipay. Dealers who support the Alipay feature will already be displayed in the app. In addition, these dealers can also participate in coupon promotions.

But the trend towards mobile payment is gaining momentum outside of China. Alipay's non-Chinese market grew by 130 percent in the past fiscal year. For further expansion, Ant Financial is already buying established payment providers from other countries. This procedure is intended to accelerate the dissemination of Alipay. But Wirecard also wants to take advantage of this trend and is developing its own app for mobile payment. Boon should therefore promote mobile payment in Germany in the mainstream. In addition to traditional bank transfers, customers can soon apply for loans and take out insurance.