What can US retailers learn from China about mobile payments?
By Andre Malinowski, CEO, Computop Inc. U.S.
When it comes to mobile payments, it's no secret that China is in the lead globally. In 2016, mobile payments totaled $5.5 trillion in that country, according to iResearch Consulting Group. In comparison, Forrester Research estimated that the U.S.'s mobile payments market was $112 billion – clearly a significant difference.
The success in China is largely driven by consumers' adoption of mobile wallets like Alipay and WeChat/Ten Pay, which make up the majority of the mobile payment market. While there are some mobile wallets in use here in the U.S., they are not nearly as widely adopted.
Getting consumers to change payment behaviors can be challenging, but people almost always have their mobile phones with them. With the right motivation, merchants can capitalize on the growth opportunity and cost savings that mobile payments present.
So, what can U.S. retailers learn from China's success in mobile payments, and how can they can apply these learnings to their businesses? Following are some considerations:
- Consumer preference is key. Chinese consumers want to pay with their preferred method of payment. And that often means whatever wallet best suits their needs at a particular time. Many Chinese merchants accept more than one wallet as a method of payment, so consumers can choose which to use based on the promotions and incentives offered. U.S. merchants should consider accepting several wallets as means of payment, allowing consumers to use their preferred choice at that moment.
- Ease and convenience are priorities. In China, through the use of these kinds of wallets, payment can easily happen via QR code. It's much easier to pay with a quick scan of a QR code than fumbling around for a credit card, debit card or cash. Offering convenience options like these to U.S. shoppers can help retailers drive payments via mobile devices.
- Social plus shopping keeps users engaged. WeChat/TenPay is quickly gaining ground on Alipay in China by including online shopping and e-payment into its widely used instant messaging app. This helps to keep users on its platform, rather than going elsewhere to shop.
A company recognizing the benefits of having a social component – and doing it successfully in the U.S. – is Venmo. For a wallet to be successful, it needs to offer a value-add for both the merchant and the shopper. The merchant can use it as a marketing tool to attract more shoppers either through discount offers, suggestions or review features in the app itself. And the shopper benefits from these discounts and can share his shopping experience with his network. This creates a win-win scenario for both sides.
Overall, China is leading the way in offering payment options like these kinds of wallets that present many benefits to both merchants and consumers alike, helping to drive the explosion in mobile payments. While nothing is bulletproof, mobile wallets are more secure than credit cards, especially given that chip and PIN are not completely adopted in the U.S. They are also more attractive to consumers given the incentives and social components they can include. In addition, they are more convenient to use. And a final, significant benefit — wallets don't typically have chargebacks, unlike credit cards, saving merchants money.
While there is still consumer education to be done regarding the benefits of mobile wallets in the U.S., retailers should strongly consider offering them as a method of payment so they can leverage the many advantages they present both for their businesses and their shoppers.