China counts more than half a billion smart phone users, spelling strong growth potential for NFC (Near Field Communication), according to a new report from Timetric’s Cards and Payments Intelligence Center (CPIC).
Growth in contactless mobile payments (m-payments) is expected to accelerate in China, as retailers and mobile operators actively promote contactless technology as part of their efforts to improve customer experience and lock in their Chinese customers, the report states.
Major handset manufacturers Apple, Samsung, Huawei and Xiaomi have all launched NFC mobile payment solutions in 2016, in association with China UnionPay (CUP).
In December 2015, CUP launched contactless m-payment service QuickPass, in association with 20 commercial banks. QuickPass m-payment is already available at more than 10,000 locations of 25 franchise chains including Carrefour, McDonald’s, Watsons, FamilyMart and COSTA.
“By partnering with new entrants to the payments market, CUP is looking to strengthen its position in proximity consumer payments in China,” says Kartik Challa, analyst at Timetric.
“CUP is, however, facing strong competition from e-commerce giants Alibaba and Tencent,” he adds.
E-commerce giants drive Chinese online and mobile payments ecosystem
Contrary to developed markets such as the US, where payments and technology companies hold the majority share of online and mobile payments, in China e-commerce companies lead the way.
Alipay, a payment solution by e-commerce giant Alibaba, accounts for roughly 70% of China’s third-party mobile payments and 50% of online payments.
E-commerce companies like Alibaba and Tencent are constantly coming up with innovative strategies to further penetrate the country’s online and mobile payments ecosystem. Companies are now trying to integrate their payment solutions into services which are already popular with consumers, in particular social media apps such as WeChat.
To further strengthen their position in the market, e-commerce companies are expanding their merchant base to increase their acceptance network. Tencent recently partnered with McDonald’s and 7-Eleven, for example, while Alibaba invested in food-delivery app maker Ele.me, which allows users to make payments using Alipay.
“Consumer awareness and willingness to make online purchases on mobile devices is on the rise even in China’s remote areas, primarily because of underdeveloped brick and mortar retail outlets, availability of low-cost smart phones and robust logistic infrastructure,” comments Challa.
It is reported by Alibaba that Alipay registers stronger growth in remote areas than in the main Chinese cities. To support this growth, Alibaba is also investing heavily in logistics infrastructure in these areas to facilitate on-time delivery of goods and services.