Going from mobile payment to card, a backward evolution?

The Chinese payment industry has been developing a technology of its own to complete payments for a few years: QR-codes. They have been extremely successful: Alipay runs US$ 519 billion (EUR 471 billion) worth of payments and claims over 600 million monthly active users, according to DMR, while WeChat Pay claims 900 million monthly users, according to businessofapps. Also, iResearch estimates that WeChat commands 40% of the market, compared to 54% for Alipay.

In order to have a secure payment system and to comply with KYC regulations, Chinese mobile payment users have to identify themselves when they create an Alipay or WeChat account with a Chinese bank account and phone number.

Almost half (45%) of WeChat Pay users say they do not carry around cash any longer according to ChinaChannel. The success of mobile payments led some merchants to get totally rid of cash and to only accept payments by these QR-code based system, which turned into an unsurmountable obstacle for foreign tourists and temporary residents alike.

China received 30.5 million foreign visitors in 2018, an increase of 4.7% year-on-year. Tourists spending in areas such as hotels, shopping and food rose 5.1% to US$ 73.1 billion (EUR 66.3 billion) last year, according to Ant Financial, a potential that could not be left unexploited by the two giant payment operators.

Now Ant Financial Services Group, the company that runs Alipay, is setting up a program called ‘Tour Pass’ to solve this issue. They will allow visitors up to 90 days usage of their Alipay smartphone application without requiring it to be tied to a Chinese bank account. The foreigner’s Alipay prepaid account will be linked with a prepaid card provided by Bank of Shanghai, that can be replenished with international debit or credit cards, with a maximum instant balance of CNY 2,000 (EUR 259).

WeChat Pay is not left behind as they announced agreements with Visa, Mastercard, Discover, American Express and JCB allowing overseas cardholders to link their accounts to WeChat Pay for payment and services in China.

Once again, the fact that mobile payment operators had to get back to the previous technology of payment cards is a demonstration of the well-known principle that says a payment system never totally replaces another one. We just keep on adding new options and can never get totally rid of older ones.