How the West can be won over by m-payments
Mobile payments are huge in China, but neglected in the West. Richard MacManus looks at what it takes to switch a leather wallet for a digital one
Silicon Valley is rightly seen as the world’s centre of technological innovation. But there’s one major technology category where Silicon Valley continues to be a laggard: e-commerce payments. Other than Paypal, a flawed product that somehow managed to dominate the early e-commerce ecosystem, there have been very few breakout online payments companies. Square and Stripe might beg to differ, and Apple Pay is making some progress. But so far, in the West at least, credit card companies continue to be the primary method of payment online.
This isn’t the case in China, or indeed other Asian heavyweight economies like Japan and South Korea. China has e-commerce completely figured out and optimised to our mobile-centric lifestyles. The two leading payment tools in China are Alibaba’s Alipay and Tencent-backed Tenpay (operator of WeChat Pay). They allow sophisticated e-commerce functionality such as scanning a QR code to pay for your coffee, splitting a restaurant bill, or receiving instant coupons – all done inside a smartphone chat app. While those of us in the West fumble in our pockets for our credit cards, Chinese consumers simply wave their phones and pay for stuff instantly.
China’s mobile payments adoption was an opportunity that New Zealand startup Latipay found too good to pass up. Latipay has figured out a way for Chinese consumers to pay for foreign overseas goods and services, using the mobile payments systems they know and love (like WeChat). Latipay already works with hundreds of New Zealand and Australian retail businesses, and in May it will launch in the US and Singapore.
The range of products that Chinese customers want from New Zealand currently appears limited. Right now it’s niche items like manuka honey and vitamin supplements. Even so, according to Latipay CEO Leigh Flounders, his early customers are experiencing growth. “We have seen an approximate 30 to 40% increase in transactional revenue for clients over a four month period, since integration of the Latipay e-commerce payment button,” he told me.
I wrote recently about the need for New Zealand to increase our export trade, and Latipay is a product that can help with that. I’m willing to bet that Chinese consumer interest in New Zealand will soon expand beyond honey and vitamins.
I imagine our excellent local coffee and craft beer producers, for example, would be keen to reach more Chinese consumers.
Not to mention the opportunities for our tourism and education sectors. Making cross border e-commerce easier for New Zealand’s exporters is a key enabler.
Simon Young says we should even look beyond China to reach those customers. Young is CEO of Red Circle Network, a digital media agency which helps western companies reach Chinese consumers. He pointed out that Chinese consumers don’t necessarily live in China anymore. “There’s a global diaspora” from China, he told me, “that makes market entry easier in the world’s biggest, and arguably toughest, market.” Young thinks that recent changes in financial technology “are going some way towards bridging the massive gaps that exist between NZ brands and their Chinese market.”
Of course the reason why startups like Latipay are able to connect NZ brands to Chinese consumers is because of China’s adoption of mobile payments. Which begs the question: why aren’t US, New Zealand, and other Western countries adopting mobile payments too? Instead, many of us continue to use credit cards when buying goods or services. We in the West are still in the dark ages when it comes to e-commerce transactions.
It’s not as if some of the West’s biggest technology companies aren’t trying. Apple’s mobile payments solution, Apple Pay, can now be used in a host of well-known US stores, such as BestBuy, Whole Foods, Macy’s and Starbucks. In fact over a third of all US merchants, 35 percent, accept Apple Pay as of December 2016. That figure was just 4 percent in 2014, so Apple Pay is making progress – at least with retailers.
The trouble is, we consumers aren’t adopting it in equal measure. According to the Wall Street Journal, only an estimated 13 percent of iPhone users have used Apple Pay to make purchases. Why? It appears to be a simple lack of enthusiasm. In the latest quarterly mobile payments adoption study by the blog PYMNTS, both consumer adoption and usage of Apple Pay had declined. As of March, nearly 49 percent of people who have Apple Pay installed did not use the product “because they’re happy with their existing payment methods.”
I have a confession to make. Even though I’m a heavy Apple user and own a modern iPhone, before this article I had not set up Apple Pay on my phone. It wasn’t that I hadn’t known about it. I’d been prompted to install Apple Pay every time my phone installed a software upgrade.
I’d also seen all the TV adverts for Apple Pay, including the ones by ANZ that played repeatedly during the international cricket season. I bank with ANZ and they regularly remind me to try Apple Pay in their emails and letters.
But despite all those ads, prompts and reminders, I just couldn’t be bothered installing Apple Pay.
Like the PYMNTS survey respondents, credit card payments work just fine for me.
I asked Latipay CEO Leigh Flounders why Western consumers are such late adopters when it comes to mobile-centric payments. The primary difference, he replied, is that in China e-wallets and wider social applications are combined. He listed bill-sharing, hotel reservations and paying for transport as examples. By making it easier to pay for these things, “e-wallets have become the payment method of choice and are therefore used more than credit cards.” He added that Apple Pay in New Zealand “is fundamentally just an extra payment method, but it is not combined with any other solution that makes purchasing easier or consumer behaviour more streamlined.”
Perhaps we should just blame Facebook, for its relatively featureless chat app Messenger. But it’s also a case of slowly changing our payment habits. I for one have now joined the mobile payments revolution, by finally installing Apple Pay. Now I just need to stop reaching for my leather wallet, and instead open my digital wallet.
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