Mercator Blog

Robust Asian Mobile Payment Apps Drive Life-Style Commerce
Date: May 16, 2018
Sarah Grotta
Director, Debit and Alternative Products Advisory Service
Mobile payment adoption in Asia has very little in common with the U.S. experience. Consumers in China and India use their mobile payment apps to manage many aspects of their lives, not just money movement, and they are fiercely loyal to their chosen apps. The providers of the apps didn’t start off as financial solutions providers but built a following in other businesses such as e-commerce and social networks. Payment capabilities were added to better facilitate purchases or person-to-person (P2P) payments or fund transfers, opportunities that arose adjacent to the providers’ primary businesses. In China alone, this approach has created a mobile payments market of more than $5.5 trillion, 50 times greater than U.S. volumes (a huge volume even in a population of 1.3 billion, which is nearly 4 times greater than the U.S. population of 325.7 million). Payment apps Alipay, Paytm, and WeChat Pay each achieved extraordinary growth by becoming entirely central to their customers’ lives. The closest analogy in the United States is Google, which branched off from search to encompass mobile operating systems, office productivity applications, social networking, maps and directions, email, streaming video, e-commerce, as well as payments. However, Google has not been as successful as Alibaba and WeChat at the payments piece because of the availability of numerous viable alternatives.

The founders of the apps that are the subject of this report took advantage of their late-to-market position to learn from others’ mistakes, which sped their development. The three each had the advantage of entering an environment in which payments were handled almost entirely in cash and their apps offered a better way to pay as commerce became more digital. Also to the apps’ advantage were the fact that banks in China and India were slow to move on new forms of payment and the fact that in both countries the banks were slow to respond to a growing middle class that previously had not had much interaction with mainstream banking.

The Asian mobile app networks’ growth has been spurred by powerful but distinct factors in their respective countries. The Indian government’s surprising and sweeping demonetization in 2016 created a surge of demand from consumers to use smartphones to transact business and pay for goods and services. China’s politically influenced economy and tolerance for powerful companies—whether state-run or corporate—set the stage for Alipay and WeChat Pay to dominate in that country. Both organizations benefitted from China’s central planning and protectionist policies to effectively block outside competition. Ironically, these protectionist ways are now serving as barriers to entry for Alipay and WeChat Pay into other countries, which are increasingly opposed to international expansion by the Asian mobile giants.

A look at these formidable apps from Asia is not just an academic study of a contrast with the Western world. They are in part an inspiration for apps that are looking for relevant services to help tighten the bonds with customers. In the U.S. today, organizations like Amazon and Facebook are attracting more customer activity through the addition of payment solutions like P2P, remittance, and lending products. It should also be noted, perhaps as a warning to legacy payment providers primarily in North America and Europe, that these apps are not staying within the confines of the Asian continent. They have been making steady inroads into the U.S., creating networks of merchant acceptance locations and in the case of Paytm, offering a bill-pay service in Canada.

The markets of the West are different competitively and more fragmented than the Asian markets. However, the Asian mobile examples can offer inspiration and ideas for features and services that could expand and strengthen customer relationships in Western markets as well. Realistically, what worked in China and India may not always make sense in the Western markets, but these examples are certainly worth attention as Asian mobile providers are a force to be reckoned with on a global basis. They can provide some lessons in for the slower-growth mobile payments environment of the U.S. and other countries.
A new research report from Mercator Advisory Group, Asian Mobile Payment Apps as a Way of Life: A Look at Alipay, Paytm, and WeChat Pay, describes how these dominant mobile app systems developed and grew to their current size, and the examples they represent for Western mobile payment apps.