China’s preferred payment methods are more than just digital wallets, they’re a way of life. And doing business there means rethinking the familiar and embracing the new…

 

There’s no doubt about it. For most, China represents a bit of a mystery. From its cuisine to its style of communication, China’s cultural differences to the West are significant. 

 

Its preferred payment systems – WeChat Pay and Alipay – are no different. 

 

Forget the familiar credit and debit cards the majority of U.K consumers choose to pay with. In China, these two super apps have revolutionised the payments industry.

 

A mobile payment pioneer

 

Despite using cash almost exclusively as little as two decades ago, today, Chinese customers overwhelmingly use digital wallets. A nation of smartphone lovers, it’s perhaps no surprise that 54% of e-commerce transactions in 2019 were via digital wallets, with that figure expected to reach more than 65% in 2021. 

 

The two biggest players – Alipay and WeChat – represent a distinct market duopoly, covering more than 90% of digital wallet transactions. 

 

The apps use QR codes and in-app features to pay for goods and services – but their capabilities extend far beyond payments.

 

Whether you are a business selling via a website, retail outlet, or app, understanding China’s unique e-commerce market, and the role giants like Alipay and WeChat play in them, is crucial to win over Chinese consumers.

 

Let’s look at both in more detail.

 

Alipay

Alipay launched in 2004 initially to help build trust and create a seamless experience for customers on the Alibaba website. It acted as an escrow system, temporarily keeping money paid by the buyer, and releasing it to the seller only if the buyer was satisfied.

 

It quickly proved so successful that it was rolled out beyond the Alibaba ecosystem and in 2008, it officially introduced its digital wallet. Cue: massive growth. 

 

Twenty million new users came on board in the first two months of 2009. In 2019, it had 900 million active users. In 2020, that growth had accelerated, with 801 million active users per month. That’s right. Per month.

 

It’s position as a multi-use app means payments is just one area of capability. Users can do everything from in-app shopping, booking a taxi and scheduling a doctor’s appointment. And Alipay’s escrow function is still paramount – users are asked to confirm delivery of purchases made, which then prompts the release of their payment to the seller. Until that moment, the payment is held by Alipay.

 

While WeChat has the largest pool of potential shoppers by virtue of its social platform and messenger (more on that below), it is yet to reach Alipay’s number of actual paying customers. Right now, Alipay is still the most popular online payment system in China.

 

WeChat Pay

In 2011, Tencet launched WeChat, an instant messaging app similar to WhatsApp, known as Weixin – Mandarin for ‘micro message’.  Fast-forward to today, and WeChat is a fully-fledged ecosystem, offering users a wide range of functions. By far the most widely-used multi-function app in China, Forbes magazine called it “one of the world’s most powerful” mobile apps.

 

Through its WeChat Pay (also called TenPay), a digital wallet, users can make in-store and online payments for goods and services, or top up a mobile phone account. There’s also functionality that allows a product’s barcode to be scanned so that users can check if it’s available cheaper elsewhere. 

 

A push for integration saw the launch of mini-app WeStore in 2020, allowing enterprises, businesses, and individuals to open a mini digital storefront, sales from which are completed in-app.

 

And its usability doesn’t stop there. WeChat incorporates gaming, the ability to send money to other users, a fitness tracker so that you can track and compare steps and other fitness goals, a Go Dutch bill-splitter function, the ability to order food and make restaurant reservations… the list goes on. 

 

It’s no exaggeration to say that WeChat is an integral part of the average Chinese life. In the last quarter of 2020, WeChat had over 1.2 billion monthly active users. 

 

“It would now be very difficult to live in China and be a normal functioning member of society without having a WeChat account,” says analyst and WeChat specialist Matthew Brennan.

 

China’s payment ecosystem at a glance…

 

 

• U.K payment systems are not applicable in China, with more than 90% of e-commerce done via its native AliPay and WeChat Pay apps.

• Mini-apps embedded within Alipay and WeChat are helping to drive user growth and retention.

• A mini-app could be an e-commerce retailer’s site, a ride-sharing service, a restaurant’s order-ahead site, a banking and investing app, or even a municipal utility.

• An AliPay or WeChat consumer or business user may use tens, if not hundreds, of these apps throughout their day.

• There are more than a million mini apps available on WeChat and AliPay.

• Most users have both the Alipay and WeChat Pay apps and switch between them based on transaction context.

• With low processing costs, quick receipt of deposits and no chargebacks, Alipay and WeChat Pay are appealing solutions to merchants.

 

The future is now

 

We know that Chinese consumers represent enormous potential for British retailers. Those best positioned to take advantage will be those that can provide the online retail experience these Chinese consumers now expect, which includes world-leading apps and seamless digital wallet payment options.

 

The first step? Integrating functionality into your existing payment platforms that allows Chinese customers to pay through their preferred WeChat and Alipay – and we’re here to help. Chat to us today.