Mobile payment is developing in a rapid pace in mainland China. Mobile transactions between January and October 2017 amounted to a total of US$12.77 trillion and increased by roughly a third compared to previous year.1 Mobile payment enabled Chinese consumers to make electronic transactions at any level, ranging from purchasing your breakfast at a small roadside food stall to paying your monthly rent. The rapid adoption of mobile payment is typical for China, while consumers in developed regions such as Western Europe or the US seem to be reluctant to incorporate mobile payment in their daily lives in a such a way as it occurs in China.
Mobile payment has trouble with positioning itself in developed regions due to the presence of a solid banking infrastructure. China has made a remarkable development since its opening up in 1978 and has ‘skipped’ the banking evolution during its process in becoming a developed country. In contrast to the Chinese situation, the majority of the people in the aforementioned regions already possess a debit card, credit card or both when they got in touch with mobile payment. Combined with a well-established payment infrastructure, there is little need for these people to switch to another payment platform. In fact, it may even become a burden to do so.
For example, in the Netherlands a debit card will assure you to pay closely to anywhere in the country, as cash machines and cash devices are nearly all over the place. In case you would leave your cash and debit card at home, as a consumer you run a great risk of unable to buy anything because mobile payment platforms are generally not supported.
Mobile payment has been successful in China, but only because it passed the banking evolution. In developed countries, banking infrastructure enjoyed the time to settle in society and people’s daily activities. The financial sector is however catching up with people’s smartphone behavior by introducing mobile debit card functionality to smartphones.2,3 Although we see an alternative mobile payment platform emerge, one that is closely intertwined with the banking infrastructure, it will not replace the debit card in the short term.
Sources
1http://www.chinadaily.com.cn/a/201802/19/WS5a8a8e42a3106e7dcc13d08f.html
2https://www.rabobank.nl/particulieren/betalen/contactloos-betalen/rabo-wallet/
3https://www.ing.nl/particulier/mobiel-en-internetbankieren/mobiel-betalen/index.html
Thank you for the interesting post. I was also thinking about this topic when I have studied in China. I observed how advanced in online payments China is and similar situation is happening in Russia as well. I am sharing the position that it is mainly due to the sharp breakthrough in banking system by “developing countries”. Without the need to start the development of the banking system from the scratch, some countries were able to implement the most advanced technologies. It makes me think that in some cases there is an advantage of non-implementation of certain innovations at the beginning. Otherwise, significant amount of money should be spent on changing wide-spread technologies on something new. Of course, it does not make sense to stay aside and wait until someone else do it but I believe that we need to be very careful with what we are implementing on the large scale.
Very interesting topic and clear to the point! Yes, I definitely agree the reason that Europe has not developed a smartphone paying system despite being a more “developed” market is because of the earlier established market advantage of credit cards.
For most European countries, it will be very hard to switch to a different payment method when the other alternative is highly identical and already dominate the market. It should also be noted, however, many banks are already introducing phone payments with cellphones’ NFC feature, which can work the same way as contactless bank cards.
p.s. Another interesting phenomenon I’ve noticed in Europe is that in the middle countries, such as Germany, Netherlands, debit card is much more prevalent; however, if we go north, or south in western Europe, credit cards (MasterCard and Visa) become the dominant cashless payment method.
The gap between the acceptance of mobile payment methods in the different continents and even in the individual countries is a very interesting topic. I also think that in comparison to China or India developed regions as Western Europe are less accepting towards mobile payment options. Nevertheless, I am convinced that it needs to be distinguished between different countries in Western Europe. In Europe, Scandinavian countries are particularly advanced in the utilization of mobile payments. Especially Sweden and Denmark are on the way to becoming cash free societies. In contrast, countries as Germany, Spain or Italy are still very cash dependent. For example, payments in Germany are to 80% made in cash.
Additionally, I am convinced that not only the advancement of banking infrastructures and regulations play an important role in the adoption of mobile payment methods, but also psychological factors need to be considered. For example, the attitude towards money in Germany is quite traditional. Data protection is a major concern and many people believe that mobile payment methods are not safe enough or to complex. Additionally, mobile payment methods represent a loss of control, in terms of the awareness of the amount spent.
Overall, I think that the development and acceptance of mobile payment methods is based on the transformation of existing banking infrastructures along with the existing regulations in the westernized countries and on the necessary change of traditional mindsets.