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China’s Alipay to join NZ’s Eftpos network

Chinese tourists will soon be able to pay for goods and services in New Zealand by waving the Alipay app on their mobile phones at some Eftpos terminals, potentially supercharging the spending of up to one million tourists within five years. Nikki Mandow reports.

The news that Alibaba’s Alipay mobile payment service has done a deal with New Zealand Eftpos terminal supplier Smartpay isn’t going to change the world - though it did see Smartpay shares jump 35 percent on the announcement yesterday.

But it is a sign of a somewhat surprising focus from the world’s largest retailer on lil’ old NZ.

Maybe Alibaba co-founder and executive chairman Jack Ma just likes our green and pleasant land. Ma, who you would have thought would be kept relatively busy leading the US$500 billion, China-based tech conglomerate, was snapped recently in the Waikato sitting on a three-legged stool milking a cow - by hand.

But the SmartPay deal is the latest in a series of incursions into New Zealand by the Chinese e-commerce giant, including the signing of a memorandum of understanding with then PM John Key in 2016, the setting up of an Australia/NZ office in February 2017 and the purchase of a 57 percent stake in Theland New Cloud in December last year. Theland owns 29 dairy farms, including 16 of the former Crafar farms. Theland subsidiary Milk New Zealand Dairy now supplies fresh milk to 18 of Alibaba’s Hema Fresh supermarkets in Shanghai.

So the Alipay deal should be seen perhaps as just the latest show of interest by Jack Ma in this part of the world. Alipay is the dominant mobile payment service in China, with over 520 million active users, although its rival Wechat Pay isn't far behind.

It's hard for New Zealanders, with our entrenched system of credit and/or debit cards, to understand quite how transformational mobile payments have been in China. Three years ago cash was still king; now people whip out their smartphones to pay for anything from an airline ticket to a street haircut, a taxi ride to a set of caligraphy brushes. There's a joke that beggars prefer mobile donations to cash.

The system works using QR (quick response) codes, those odd-looking 2D barcodes with patterns of black and white squares. QR codes are good for payments because they contain more information than a normal barcode and they can be processed quickly by a device like a smartphone. All you do if you want to buy something is open up the payment app, hold the QR code against the store's scanner, and the money is deducted via the app. 

(Already some canny NZ companies are using QR payments. Buy a flat white from the Mojo coffee chain in Auckland or Wellington and you can pay using your phone, the Mojo app and a QR code. The money is taken off what you've preloaded onto the system and you automatically get your loyalty discount and a GST receipt if you need one.)

Mobile payments using a QR code are rare in New Zealand, but not unknown. Mojo coffee afficionados can already pay for their fix using the Mojo app and their smartphone. Photo by Nikki Mandow

Alibaba’s New Zealand managing director Maggie Zhou says that only 13 percent of the 400,000 or so Chinese visitors who came to New Zealand last year have a credit or debit card; most of them are forced to use cash when they are here. So Alibaba, Smartpay and the customers using its Eftpos terminals hope that by giving Chinese tourists and business people access to the payments method they are used to, they will spend more.

That’s potentially good for NZ Inc, and certainly good for Smartpay, which will take a percentage of each transaction.

One problem for NZ Inc however, is that Chinese shoppers may find it frustrating that some outlets will offer Alipay, but the majority of outlets won’t. Smartpay has about 33,000 terminals in New Zealand - but that’s less than 25 percent of the total. Smartpay CEO Bradley Gerdis says his company has developed unique cloud-based software that allows its terminals to generate QR codes and talk to Alipay. This will give Smartpay a competitive advantage, he says, and potentially lure tourism businesses to switch from competing terminal companies.

“We have a pipeline of merchants - from tourism operators to hospitals to companies dealing with international students - crying out for it.”

It’s a global marketplace and making it easier for people to buy things is good for the economy. Visitors who are relying on a fixed amount of cash may think more judiciously about spending it. But [with Alipay] they can spend funds they have at home, so they are likely to spend more.

Stephen Bridle, CEO Marketview

The company will launch a New Zealand trial of the Alipay system early next month, Gerdis says, with an Australian pilot following.

Still, Alipay isn’t restricted to using Smartpay services. In 2017, Christchurch Airport signed a MoU with Alibaba to use and promote the payments platform, and has started signing up other businesses, including Wellington’s Weta Studio Tours.

Meanwhile Paymark, the New Zealand electronic network which provides services for most of the Eftpos terminals in New Zealand, including those owned by Smartpay, says it is also investigating different options.

“We are working with a range of these new next generation payment mechanisms to work out what merchants and paying customers want,” says spokesman Paul Brislen. Any deals are probably on hold just at the moment, however, as the company beds in a $190 million sale to French company Ingenico Group.

Will it reverse the trend?

The big question is whether Chinese visitors will actually spend more in New Zealand if Alipay is available. If so, that might help reverse the trend of falling visitor numbers and spend per visitor. Total Chinese arrivals dropped 5 percent in the year to January and spending fell 11 percent to $1.46 billion, although that may have overstated the fall because the Chinese New Year fell in January in 2017 and February in 2018.

The Government forecast last year that Chinese tourist spending would rise to $4.3 billion by 2023 and the numbers of visitors would rise to almost one million a year, making China a bigger tourism source than Australia.

Stephen Bridle, the CEO of consumer spending research company Marketview thinks Chinese visitors will spend more if they have mobile payment options - though he says it’s hard to quantify how much more.

“It’s a global marketplace and making it easier for people to buy things is good for the economy. Visitors who are relying on a fixed amount of cash may think more judiciously about spending it. But [with Alipay] they can spend funds they have at home, so they are likely to spend more.”

The challenge for retailers is to use the Alipay system to upsell to Chinese visitors, while they are in store, but also online before and after their trip, Bridle says.

“It may be at the margin, but if this is a way of getting that extra dollar, that’s great.”

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