Faster than you can say ‘Ni hao’: China’s speed payment revolution

Looks like smartphones have officially replaced the good ol’ wallet

Started by Chinese e-commerce giant Alibaba in 2009, Singles’ Day is the Chinese equivalent of the shopping sales Black Friday or Cyber Monday held in the United States. In 2010, Singles’ Day took less than US$1 billion dollars from the retail event.

Fast forward to 2017 when Alibaba’s third-party mobile and online payment platform Alipay handled a staggering 256,000 transactions per second at its peak; consumers went on a shopping frenzy. In the span of a day, Alipay netted US$25.3 billion1 in gross merchandise value (GMV), far exceeding US e-commerce giant Amazon’s GMV of US$5.03 billion over the Black Friday weekend the same year.

Significantly for Alipay, mobile payments accounted for 90% of Alibaba’s GMV on Singles’ Day2 (compared to 37% for Amazon over the Black Friday weekend3). This is no surprise given that 95% of internet users in China surf the net on their mobile devices4. Mobile payment transactions in China topped US$12.8 trillion in the first 10 months of 20175 — a figure 260 times greater than the US total (US$49.3 billion) for the whole year.

Here’s the secret to China’s rapid development in cashless payments technology: an open regulatory environment that gives new players more room to innovate and leapfrog one another. To investors, this wiggle room may also give China a competitive advantage over developed economies with more defined regulatory frameworks, such as that of South Korea, Japan and the US.

The move to a cashless society will yield winners and losers. Let Eastspring Investments help you navigate this evolving landscape in China.

Sources:
1 https://www.enterpriseinnovation.net/article/alipay-processes-us25-3-billion-gmv-during-2017-singles-day-1827385689
2 https://bankinnovation.net/2017/11/alipay-dominates-alibaba-singles-day-with-90-of-transactions/
3 https://www.retaildive.com/news/meet-the-winners-and-losers-of-black-friday-2017/511661/
4 https://www.emarketer.com/Article/More-than-95-of-Internet-Users-China-Use-Mobile-Devices-Go-Online/1015155
5 https://www.scmp.com/tech/apps-gaming/article/2134011/china-pulls-further-ahead-us-mobile-payments-record-us128-trillion

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