Upwardly mobile


China's millennial consumers drive a cashless craze.

Today, China is transforming itself into a cashless society. In 2016, Chinese consumers spent 4.7 trillion euros through mobile payment platforms. This staggering sum represents 50 times the amount spent by American smartphone users over the same period. 

While consumers in the West still cling to credit and debit cards, their counterparts in China are leveraging the so-called late-mover advantage, leapfrogging plastic and moving straight from cash to mobile payments. 

"From meals to movie tickets, I use my smartphone to pay for pretty much everything," says Selina Chan, director of marketing communications at The Langham Hotel in Shanghai. "It's got to the point now where it feels strange to visit the ATM."

The digital demographic 

China's rapid transition toward mobile payment is largely being driven by the country's tech-savvy millennials, who now account for over 30 percent of the entire Chinese population. According to research by Deloitte, around 97 percent of China's millennial generation now own smartphones – half access the internet through their smartphone over 26 times a day, and 10 percent over 100 times a day.

Demonstrating a willingness to adopt new mobile apps and websites, millennials have underpinned China's m-commerce boom. More than half of all digital commerce in China – worth an estimated 636 billion euros in 2016 – is now carried out by smartphone users. 

"Through their use of mobile platforms, Chinese millennials are changing the very nature of retail in China," says Zennon Kapron, director of Asia-based financial research firm Kapronasia.

A tale of two platforms

Today more than half of all daily money transactions in China are made using Alipay or rival WeChat Pay. Together, the two platforms currently service around 90 percent of all Chinese mobile payments.

The battle between Alipay and WeChat is a story of two different business models. Alipay was launched in 2004 as an internet-based payment service using the e-commerce platform Alibaba, and developed for mobile with the Alipay app five years later. By 2016, Alipay was processing 175 million transactions per day, 60 percent of which were completed through a smartphone.

If the strength of Alipay comes from Alibaba's portfolio of e-commerce businesses, then the strength of WeChat Pay is underpinned by the huge  popularity of the WeChat app (China's answer to WhatsApp and Facebook combined). Released in 2011 by internet service provider Tencent, WeChat now boasts over 900 million active monthly users. Using the WeChat Pay wallet, they enjoy pretty much the same benefits as Alipay users. 

Alipay and WeChat Pay are now evenly balanced, with both platforms making forays into the international market. Who will come out on top remains to be seen.

"There has been a dramatic shift over the past year as WeChat Pay has leveraged its social media advantage to drive mobile payments," says Kapron.  "Overseas, a lot will depend on the partnerships that each platform is able to develop." 

Finnair's mobile services take off

In January 2017, Finnair became the world's first airline to allow travellers to pay for in-flight shopping and services with Alipay. The service is now available on all Finnair's China flights, which have already witnessed a 100% increase in sales. 

Text and photo by Daniel Allen 

This article was originally published in Finnair's Blue Wings magazine (September 2017).



Published August 24, 2017

Category: Local features, Economy