Will Alipay Dominate Global Mobile
Payments?
CONTRIBUTOR
I write about China's middle
class and consumer trends.
A driver
uses his smartphone to pay the highway toll by way of Alipay in Hangzhou, China
on September 21, 2016. (Photo credit STR/AFP/Getty Images)
Ten years ago, eBay lost
the battle to conquer China’s e-commerce market to
small upstart Alibaba. Ten years on, China’s e-commerce market has grown more
than tenfold, and Alibaba has become a global conglomerate with its arms
stretching across multiple disciplines such as payments, big data,
Hollywood and more.
The game
of e-commerce has also changed. With proliferating smartphones, e-commerce has
become increasingly mobile. Euromonitor estimates that mobile commerce will
amount to $972 billion by the end of this year. By 2021, mobile payments are
expected to reach $3 trillion.
This is
an area where American companies are falling behind. There is no clear market
leader in the U.S. mobile payments industry. Apple Pay may be the closest
to being a leading player. PayPal is playing catch-up in mobile
transactions. Their positions, however, may soon be challenged by
Alipay, China’s largest mobile payment service provider with 450
million users.
Alipay, originally created by
Alibaba, and now a part of Ant Financial, is rapidly expanding its mobile
payment service to Asia, Europe and now, to the United States. On
October 24, it announced partnerships with payment processors First Data and
Verifone as its official entry to the U.S. market.
The speed
of Alipay’s global outreach is breathtaking. Last month alone, more than
80,000 retailers in 70 countries signed up with the mobile payment system, and
so did 10 international airports including Munich, Tokyo and Aukland. As the
latest development, this past Friday DFS Group inked a deal with Ant Financial
to launch Alipay at San Francisco International Airport.
Alipay’s
strategy is to target Chinese overseas tourists who have already become
accustomed to using its mobile app back home. Last year, more
than 120 million Chinese traveled abroad and spent nearly $200 billion.
Retailers
around the world are also eager to embrace Alipay in order to court
Chinese spenders. Alipay is now accepted at British luxury
department stores Harrods and Selfridges. Before long, it will be at
Macy’s or Nordstrom.
What’s alarming is that
Alipay seems to have no contenders. Apple Pay, PayPal, or any other U.S.
payment service provider, powerlessly watched Alipay’s whirlwind foray around
the world and into the U.S. market without making any attempt to combat
it. Their lack of action presents a startling contrast to Alipay’s
breakneck development.
Is Alipay
only for Chinese tourists? I doubt it. Once it is widely accepted as a
payment method in the U.S., Alipay will be in a position to challenge Apple Pay
and PayPal. Currently, Alipay has already become popular in South
Korea, Thailand, Hong Kong, Japan and Germany.
Ten years ago, Alibaba
fought eBay cleverly and drove it out of China. Although eBay
failed, it at least fought a fierce battle. This time around, however, Apple Pay and PayPal seem to have
left the door wide open for Alipay to enter their home turf without even
putting up a fight.
Mobile
payments are the future. According to Euromonitor, by 2020, 46% of
Americans will make purchases via mobile phones, compared to only 15% in
2015. If Apple Pay, PayPal, or any American payment company, wants to be
relevant in the $3 trillion global mobile payments market, they must
up their game and fast.
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