In China, the adoption rate of digital payment is high across all age groups. Digital payment has reached the senior generation and foreign visitors.The future types of payments create new opportunities for banks to build their competitive advantage in the new era. Alipay, WeChat Pay, and UnionPay have commercialized facial recognition payments to tens of thousands of stores by providing tiny and cheap facial recognition point-of-service terminals and rewarding the early-adopted merchants. China is further initiating more advanced payment methods such as facial recognition payment. Biometric-based and invisible future types of payments are gaining ground.A standalone payment company without an ecosystem won’t survive and thrive in China. The most successful banking payment app from China Merchants Bank also owns a large banking-centered ecosystem that binds with many adjacent industry partners. WeChat Pay is backed by the social media, gaming, and technology ecosystems from Tencent. Alipay is backed by Alibaba’s giant ecosystems across eCommerce, retail, and technologies. The most successful payment companies in China are all backed by ecosystems.In the early age of Alipay and WeChat Pay, the payment companies even lose money to provide a better payment experience, and their main profit source is not the transaction fees but monetizing the customer traffic and data insights and developing more high-margin products like lending products. The mobile payment market in China has scale, but the profit margin is extremely thin.There are some significant differences from the US market: Then there’s the China retail payment market. But since the base number is low, the scale of mobile payment is still limited in the short term. Forrester predicts that the CAGR of mobile payment in the US from 2018 to 2023 will be 16.8%. These underserviced customers create opportunities for mobile payments. An additional 18.7% (24.2 million) were underbanked. According to data from the US Federal Deposit Insurance Corporation, in the US, an estimated 6.5% of households - about 8.4 million - were unbanked in 2017. Even in the US, there is still some unbanked and underbanked population without access to credit cards. Not everyone is able to apply for a credit card. Mobile payment has space to grow but is far from taking off.The resilience of the check indicates the strong power of the legacy payment system. people cannot live without owning checks in the US, even though they are no longer used in many European and Asian countries. Paying a bill, renting a house, buying a house, paying the tax, selling a car. Checks are resilient in people’s daily lives in the US. Check, check, and check! If we are ranking the biggest market for checks, the US is for sure the top.All these become barriers to the emergence of next-generation digital payment such as mobile payments. Even today in the 21st century, all the fintech cool kids like PayPal and tech giants like Apple and Google are still enthusiastic about issuing credit cards. Along with the dominance of Visa, Mastercard, and American Express in many Western countries, a sophisticated payment value chain has emerged, and credit card schemes and banks are standing in the center. The strong credit card market has made Visa one of the top 10 companies in the world by market cap. Even for foreign residents, owning a Chase Sapphire credit card is a short-term goal of many new immigrants in the US I was one of them, too. From the consumer perspective, a credit card is really appealing since it does give many hard discounts and benefits. Several decades ago, the cashless level in the US reached a high level compared to the rest of the world given strong credit card adoption.
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