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| Andy Mok |
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| Shaun Rein |
About 200 million consumers use Weixin Pay and Alipay, the system owned by Alibaba Group Holding Ltd.’s financial affiliate, at physical stores because of the ease and speed at which consumers can make purchases. Some overseas retailers have balked at digitized transactions because of costs involved in changing payment systems and concern that data collected could breach customer privacy.
“Accepting mobile payment would unlock massive value for Starbucks,” said Shaun Rein, managing director of China Market Research Group, in an interview. “Since they couldn’t move customers through the line faster, they were losing 5 to 10 percent of business.”...
For giants like Starbucks, which is opening stores in China at the pace of more than one a day, the concern was over safeguarding the data of its customer base, said China Market Research Group’s Rein.
“A lot of chains are concerned about too much user-data controlled by Alibaba,” he said. “It’s their customers, but now all the data goes to the mobile payment providers. There are concerns about confidentiality.”More in Bloomberg.
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| Shaun Rein |
In recent years, Yum has ceded market share to local competitors because it was slow to react to market changes, said Rein.
“They didn’t make corporate decisions quickly enough, such as in adopting mobile payments, or adapting to consumers wanting more premium offerings,” said Rein. “Their ability to deal with the more complex environment here was held back by the lack of knowledge, the slowness of the U.S.”...
Starbucks stores in China still do not accept Alipay or Wechat, only Apple Pay, a decision which costs them 5 to 10 percent of sales, estimates China Market Research Group’s Rein.
Starbucks launched its own mobile payment system in China in July, allowing customers to pay with pre-loaded Starbucks Gift Cards via their mobile devices, according to the company.
As China’s consumer market continues to grow, more overseas companies may consider following Yum down the path of segregation.More in Bloomberg.
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| +Benjamin Cavender |
Alibaba and Alipay, which has been incorporated as a separate company since 2011, helped drive the very rapid expansion of online sales in China—now the world’s second-largest “e-tail” market. McKinsey Global Institute estimates that by 2020, Chinese e-tailing could generate as much as $650 billion in sales, and China’s market “will equal that of the United States, Japan, the United Kingdom, Germany, and France combined today.”
As much as Alibaba has driven China’s booming e-commerce market, it’s possible that Alipay will ultimately have the bigger impact on the Chinese economy. Alibaba and Alipay “are integral to each other’s success,” says Ben Cavender, principal at China Market Research Group in Shanghai. “But I wouldn’t be surprised if, in the long term, Alipay turns out to be the more important business—it’s so flexible and has so many potential uses.”...
With ... new mobile payment technologies, China has leapfrogged both checkbooks and desktop banking. Jane Yang, for example, went straight from paying rent in cash to paying via Alipay. According to PricewaterhouseCoopers, 79 percent of Chinese consumers surveyed said they were happy to receive coupons via their mobile devices, versus just 53 percent globally. And 55 percent of Chinese consumers said they expected their phone to be the main way they made purchases in the future, versus 29 percent globally.
This is a remarkable turnaround for a country that for years seemed to be stuck in a far earlier, low-tech era of consumer financial services. “The banks did nothing to make customer service easy,” says Cavender, who notes that for many years paying a credit card bill required standing in line at a bank. It could not be done through the mail or online. Only those who had significant funds to invest and lived near large bank branches had easy access to wealth management options.More in the Technology Review.
