An Analysis of the Reasons Behind China's Mobile Payment Success

This essay examines the remarkable success of mobile payment systems in China, highlighting the country's dominance in the global market. The essay identifies three key learning points from China's innovation: focusing on consumer needs through convenient payment options like WeChat Pay, prioritizing indigenous technology such as Alipay, and offering services at competitive rates. The analysis emphasizes the role of QR codes and the development of back-end systems to reduce costs. While acknowledging potential concerns about market dominance and dependence on a few providers, the essay concludes that China's achievements in mobile payments are currently unparalleled. The essay also references the potential risks of over-reliance on mobile payments, drawing parallels to Japan's experience with technology adoption.

Running head: REASONS FOR CHINA’S MOBILE PAYMENT SYSTEMS SUCCESS
REASONS FOR CHINA’S MOBILE PAYMENT SYSTEMS SUCCESS
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REASONS FOR CHINA’S MOBILE PAYMENT SYSTEMS SUCCESS
As the article published in The New York Times describes, mobile payments China has
become a “default way of life” with almost the entire population using it. The article also
mentions that China’s mobile payments have toppled the West by a huge margin. While the
mobile payments market in the United States stands at 112 billion dollars, the Chinese market
has hit 5.5 trillion dollars in 2016 (Nytimes.com 2018). These figures show the kind of success
mobile payments enjoy in China. Many things are there to learn from China’s innovation. The
essay will focus on three important learning points on innovation.
The first point of innovation that could be learnt from China regarding mobile payments
is that the innovators focused on some basic needs of the consumers. The availability of payment
option in a chatting application is marvelous as an innovation. WeChat is the leading social
media application in China that released in 2011; in 2013, the WeChat Pay was launched. Users
had the option to pay for literally everything starting from cab booking, movies to shopping and
more (Tencent.com 2018). Introduction of offers like Red Packets that allows users to present
digital cash to friends through WeChat further cemented its position.
Second learning point from China’s mobile payments success is the country’s focus on
indigenous technology. With the world’s highest population, it is remarkable for China to
become the top ranked country in the world in mobile payments. More than 77% of the
population uses mobile payment, which is way ahead than Japan and US where it is merely 27%
and 48% respectively. One of the reasons for this success is China’s dedication towards
advancing own technology and encouraging use of indigenous websites and application. Alipay
and WeChat are such examples that have replaced Facebook and Google. The facility of offline
payment using the Alipay application while making payments at the stores or supermarkets
further make the mobile payments in China dominating.

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REASONS FOR CHINA’S MOBILE PAYMENT SYSTEMS SUCCESS
The third and most significant innovation learning point to learn from China’s mobile
payments market is that the two biggest players – Tencent (owning WeChat) and Ant Financial
under Alibaba (owning Alipay) provide services at a cheaper rate (Nytimes.com 2018). Both
companies are able to do that because instead of using expensive card-readers, they allow
smaller vendors to use printout of their phone or the QR code to simply make or accept a
payment. Further, the companies have managed to keep the costs down by allowing the vendors
to keep a “back-end system that stores a record of user accounts, instead of having to
communicate with the bank”. In addition, what these companies have done is that they have not
allowed foreign companies to penetrate easily in the Chinese markets.
However, experts also raise concerns regarding the dominance of mobile payments in the
country. As more and more customers are made to depend on the two companies, they are slowly
being locked out from other options (Nytimes.com 2018). In case of business travelers and
tourists, the situation has become more troubling because they are not able to turn their phones
into wallets easily by opening a bank account in China. Further, China might lock itself in a
position where Japan was some years ago. During the early 2000s, Japan’s economy was
blooming owing to its flip phones that allowed payment at stores to streaming cable TV and so
on (Tabuchi 2018). As the world advanced to smart phones, Japan could not pace up and it went
down as a tech laggard in just 15 years (Tabuchi 2018). Experts believe that similar could be the
case with China and the over dependence on mobile payments.
Overall, it can be stated from the above analysis that although there are some concerns
regarding predominance of mobile payments, China’s success in this regard is currently
unmatched in the world.

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REASONS FOR CHINA’S MOBILE PAYMENT SYSTEMS SUCCESS
References:
Nytimes.com 2018. In Urban China, Cash Is Rapidly Becoming Obsolete. [online] Nytimes.com.
Available at: https://www.nytimes.com/2017/07/16/business/china-cash-smartphone-
payments.html [Accessed 21 Dec. 2018].
Tabuchi, H. 2018. Why Japan’s Smartphones Haven’t Gone Global. [online] Nytimes.com.
Available at: https://www.nytimes.com/2009/07/20/technology/20cell.html [Accessed 21 Dec.
2018].
Tencent.com 2018. Tencent 腾 腾 - Products & Services. [online] Tencent.com. Available at:
https://www.tencent.com/en-us/system.html [Accessed 21 Dec. 2018].