Background
While I was studying digital retail in Paris last year, I learnt how problematic it was for Parisian luxury boutiques to serve Chinese customers because a lot of them would like to use Alipay or WeChat, however, in Europe stores normally accept cash or credit card. This is true the other way around too: in China a European customer cannot use their bank cards, they will have to use cash or the abovementioned apps. But what are Alipay and WeChat and is Europe ever going to rely on such apps to pay?
Mobile Payment in China
WeChat and Alipay are two very compact applications which include social media, messaging, ordering services and products, doing business online, and so on (Jao, 2018). What they both have in common is that they are the two of the primary means of paying in China (Chooai, 2018). Essentially, people scan a QR code when they pay, they confirm with their fingerprint or FaceID, and the payment is completed. Besides these, cash is also accepted in China, however, in big cities, more and more online purchases can only be completed with these two apps, so cash is becoming less and less popular (Chooai, 2018). Credit cards are only accepted in expensive, mostly Western places and are mostly used by foreigners (Thechinaguide.com, 2019). Simply put, it feels like China simply skipped the credit card era and went from cash to mobile payment.
Payment in Europe
In Europe, cash is less and less popular, for example Sweden would like to eliminate cash completely in the upcoming years since nowadays mostly tourists and elderly use cash in the Scandinavian country (Henley, 2016). However, a mobile payment is still in its infantry compared to that of China. Although Europeans do use mobile payment, a lot of them still prefer their bank cards and most physical stores actually demand them to use those, while online stores are more willing to take mobile payment (Emarketer.com, 2017). ApplePay is, however, on the rise in Europe, therefore people now can also only use their phones and then their fingerprints/faces to pay, and no need for cash or a bankcard anymore, just like in China (Apple Support, 2019).
Future of mobile payment in Europe
The main difference between China and Europe is that Europeans still heavily rely on bankcards, while Chinese have never actually used them. They have their own method of mobile paying which made the use of bankcards unnecessary in the Eastern country. But is Europe ever going to catch up to this technology? Obviously, the technology is there and is ready to use in the West too, but is it feasible to implement it? Or is ApplePay going to take over and will make the use of bankcards unnecessary here too?
This question is quite complex and has many sides to it. What do you think? What is the future of payment in Europe?
Apple Support. (2019). Apple Pay participating banks in Europe and the Middle East. [online] Available at: https://support.apple.com/en-us/HT206637 [Accessed 22 Sep. 2019].
Chooai, R. (2018). An Overview of Popular Online Payment Methods in China. [online] SEO Shifu Blog. Available at: https://blog.chineseseoshifu.com/online-payment-methods-china/ [Accessed 22 Sep. 2019].
Emarketer.com. (2017). Personal Mobile Payments on the Rise in Europe – eMarketer. [online] Available at: https://www.emarketer.com/Article/Personal-Mobile-Payments-on-Rise-Europe/1015592 [Accessed 22 Sep. 2019].
Henley, J. (2016). Sweden leads the race to become cashless society. [online] the Guardian. Available at: https://www.theguardian.com/business/2016/jun/04/sweden-cashless-society-cards-phone-apps-leading-europe [Accessed 22 Sep. 2019].
Jao, N. (2018). WeChat now has over 1 billion active monthly users worldwide · TechNode. [online] TechNode. Available at: https://technode.com/2018/03/05/wechat-1-billion-users/ [Accessed 22 Sep. 2019].
Thechinaguide.com. (2019). Cash or Credit Card? How to Pay for Things in China | The China Guide. [online] Available at: https://www.thechinaguide.com/blog/cash-and-credit-cards [Accessed 22 Sep. 2019].
Hey Franciscka,
First of all, I would like to thank you on your insights. I recently learned much about this subject from my nephew, he is a Dutch student who lives in China. I once had a conversation with him about the velocity in which China has transformed their payment system.
He stated that the way the Chinese government implemented the current payment system, that it couldn’t be done in Western countries. Mainly because of the slower adaption rate in the western world in comparison with China
In China, the government dictates whether something is being adopted and the population accepts the influence by the government. This means that people accept the fact that there may be flaws in the payments system.
If you look at the Netherlands, for instance, the adoption would be slower, because of the legal systems who would slow down the large scale implementation of mobile payment systems.
In short, I think cultural differences form a huge barrier to implement the mobile payments systems in Europe.
Kind regards,
Hi Franciska!
Your blog post has many interesting points. First of all, it is true that Chinese would prefer to use Wechat or Alipay to pay in European stores too, and as you say, they kind of skipped the credit card phase we had in Europe. However, I would say this is a cultural and a Chinese thing overall. Previously, the information in China about Western countries and about the customs were very limited, as the country is protected from external influences and information about western traditions are quite limited. Travelling wasn’t affordable for Chinese until recently, when the country became richer. Therefore, it is understandable that it is a huge shock that the payment system they are used to at home, does not work when they travel. Same as westerners are shocked when Visa or Mastercard does not work in all of the stores in China.
Further, you ask whether Europe is going to catch up with China with QR code payment, and you further elaborate whether it is feasible to implement these kind of technologies in the West. I would say, that the NFC technology (contactless payment) has taken ground for many years and has been implemented in stores, it wouldn’t be realistic to change that (or at least very very difficult). The route that Apple Pay, Google Pay, and other developers have taken would be more feasible, as it uses the existing technology and requires little investment from individual companies and works with the same basic idea as contactless cards. For individuals, there are a lot more options in the form of paying with phone number and other applications (QR code could be a possibility to transfer money to your friends?).
In conclusion, I would say the future of payments in Europe are going to focus on the existing technologies and develop from those, rather than changing the system altogether to the direction of the Chinese system.
Hi Franciska, interesting post. I encountered the same problem when buying things in China.
I am from the Netherlands an I think it is remarkable that a wel developed in Europe as the Netherlands does not use mobile payment that much. I think you already mentioned a good reason for this, namely the preference for bank cards. I think another important reason especially for the Netherlands is the difference in payment infrastructure compared to that of for example the US. Apple pay and Samsung pay needed to build a customized infrastructure to adapt to the dutch payment infrastructure. In contrast to other countries, the Netherlands does not have a 16-digit pass number for a credit- and debit cards. Because tech giants had to adjust their infrastructure, they were not eager to roll out their technology in the Netherlands. Now Apple pay has rolled out its technology, however somewhat later than in other countries. I think this is also an important reason why the majority has not yet switched to mobile payment in the Netherlands, next to the reason you already mentioned in your blogpost of course.
Cheers,
Emiel
Hi Franciska,
It is indeed an interesting but also a complex question to think about. If I look at the Netherlands, I mainly wonder whether mobile payments through such an app will truly add value, since payment traffic is already quite efficient (contactless payments). The only benefit with mobile payments is that your phone is pretty much always within reach, while your payment card might not be. What might also be important to consider are the possible privacy issues with a payment app that is not offered by your bank. Many people might trust their bank more than they trust a company that operates in different industries. What is your perspective on this matter?
You are right that privacy is an issue to consider. Although we are already using ApplePay and such so we kind of trust these companies to deal with our money. It is a complex problem indeed and I believe that we won’t have such a thing as Alipay ever in Europe. But never say never…
Hi Franciska,
Intersting take on the subject. I am curious if you think that european governments want to with hold such apps as the EU is rather strict with regard to GDPR. On top of that Chinese companies don’t always treat the data of their customers that well.