How online retailers can cash in on Chinese payment revolution
By Joe McGuire
Mobile payments and digital wallets have been slow to take off among Australian shoppers, but success for local retailers and e-commerce may just lie in emerging markets, where seamless customer experience and integration have been key drivers of growth.
Recent RFi Group research found more Australians were making contactless card purchases than any other country but only 10 per cent had taken the next step to using smartphone based e-wallets.
These adoption levels are in stark contrast to emerging markets like China, where research shows digital wallet use is as high as 70 per cent of consumers.
There’s actually a very simple reason for this: integration. In Australia, no one thinks anything of logging into different applications on their smartphone to access the services they need, whether it’s to book a taxi, order food, or pay bills. The closest we have to an integrated payment facility is Apple Pay, which enables consumers to make payments with an iPhone, Apple Watch, iPad or Mac in-store, through an app, or online. The catch? It only works with selected retailers and selected financial providers.
Conversely, in China, ecommerce and social media platforms like JD Pay and WeChat have done an incredible job of rolling all of these services into one. Through WeChat, people in China have been able to access geolocation services, make a doctor’s appointment, post a photo, and interact with friends and family. Users spend on average 3 hours a day on the platform.
When WeChat Pay joined the platform’s services in 2014, users were automatically given their own WeChat Pay account for peer-to-peer payments and money transfers. This move saw WeChat users quickly transition into using the e-wallet service in other areas of their daily life because it was so simple. A good example of the organisation’s spirit of integration is the partnership with taxi hailing app Didi Dache, offering commuters a discount on journeys when they use WeChat Pay.
WeChat Pay now has over 800 million users and growing. For the e-commerce industry, the ability to offer frictionless end-to-end transactions while keeping customers on the one platform, is an incredible feat. It’s a similar story for Alibaba’s Taobao, a shopping app similar to eBay and Amazon which doubles as a social media platform and integrates with its own e-wallet solution AliPay. Alipay claims to have 400 million registered users. The average user of the app launches it seven times a day and spends more than 25 minutes per day shopping.
As trading online using integrated payment systems such as WeChat Pay, AliPay and JD Pay become the norm, international businesses looking to access the typically closed Chinese market are flocking to maximise the opportunities e-wallet integration brings. This has led to a large and growing demand for low-cost, high volume and speedy foreign exchange transactions, to reduce the additional expenses incurred by businesses and consumers trading across borders. It’s one of the reasons why we set up Airwallex to streamline the international payments process for consumers and businesses in Australia, China and other markets.
What does this mean for Australian retailers?
Last year over one million Chinese tourists visited Australia and that number is only set to increase with the remarkable demographic changes currently underway in country.
According to a recent McKinsey report, Chinese consumers are quickly becoming a powerful buying force. The number of “mainstream consumer” households with a disposable income of US$16,000-US$34,000 is set to increase more than eight times, from six per cent in 2010 to 51 per cent of the population by 2020. “Affluent” consumers with disposable incomes over US$34,000 are also set to triple to six per cent of the population between 2010 and 2020.
So how can Australian retailers tap this huge new customer market?
While selling directly to mainland Chinese consumers comes with a raft of tricky compliance issues, such as import regulations and capital controls, Australian retailers have an opportunity to tap into the growth in Chinese tourists, students and ex-pats.
Only around 5 per cent of Chinese citizens currently have a passport, but there is huge scope for growth as more disposable income creates more foreign travellers arriving on our shores.
So with over 800 million WeChat Pay users, 400 million AliPay users and 250 million Union Pay users, Australian retailers need ask themselves how prepared they are to cater for Chinese shoppers.
From what I’ve seen there is a distinct lack of businesses who accept Chinese payment methods.
The key to success for Australian retailers is making it as easy as possible for customers to pay – no matter where they are form.
Integration lies at the heart of the enormous opportunity that e-wallets present. While it might seem like payment technology trends are changing too quickly to keep up, Australian businesses need to ensure they are nimble enough to capitalise on their customer’s preferred payment methods or risk them spending money with others that do.
Joe McGuire is global head of sales and partnerships at international payments fintech company Airwallex. Prior to joining Airwallex, he was state manager for Commonwealth Bank’s transaction banking division in Victoria and Tasmania.