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December 7, 2017

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Smartphone payment creates lighter purse

CHINESE consumers say they feel perfectly comfortable leaving home with cash-empty pockets and relying on smartphones to pay for purchases and services. That confidence underpins the rapid development of electronic payments in China.

“Mobile payment enables me to go out with a lighter purse and saves lots of time and trouble,” said Liu Shuang, a college student in Shanghai. “I can’t even remember clearly the last time I used cash to buy something.”

A report produced by Tencent, Renmin University of China and French research firm Ipsos found that 84 percent of Chinese have no qualms about the cashless society. Indeed, there are now some 520 million people using mobile payment systems, according to Alibaba financial affiliate Ant Financial.

“The development and application of financial technology is an inevitable trend that will open new opportunities for capital markets in China,” said Jiang Yang, vice chairman of the China Securities Regulatory Commission.

In the second quarter of this year, Chinese banks handled 8.6 billion payments from mobile services, up 40.5 percent from a year earlier, according to the People’s Bank of China. The combined value of mobile payments jumped 33.8 percent to 39.2 trillion yuan (US$5.9 trillion).

“Mobile payment transactions by now have surpassed 158 trillion yuan,” President Xi Jinping told the recent meeting of the Asia-Pacific Economic Cooperation group.

Although no one disputes that mobile payments are the face of the future in consumerism, they still have some way to go. Nearly 80 percent of global retail sales are still paid for in cash, according to data from Mastercard.

For older people, in particular, paying electronically can be fiddly if not completely outside their technical abilities and comfort zones.

“Cash is what I have used to pay with for decades and it seems unnecessary to change,” said Dong Guohui, who retired from work nine years ago. “I rarely use smartphones because they are too complex and of little use to me. It’s even hard to remember passwords. Also, I wouldn’t feel secure putting money on a phone to make payments.”

Security indeed does remain a primary talking point in the payments industry.

“Security measures are important because payments involve consumers’ personal property and is one of their primary concerns,” said Ling Hai, co-president of Mastercard Asia-Pacific.

More companies are focusing on developing technologies to improve security. Biometric identification and artificial intelligence are among the most popular areas of research.

“Traditional passwords are both unsafe and difficult to remember,” Ling said. “Our research shows that the most popular password globally is ‘password,’ followed by ‘12345678.’ The better way is to make systems remember and recognize something people are born with, such as fingerprints, rather than to force consumers to remember something they fabricate.”

As part of the expanding financial market deregulation, the government is expected to liberalize market access in the payments industry in the near future, with foreign financial companies likely to gain more access to the sector.

“China will open up the payments industry in a balanced and orderly way,” Fan Yifei, deputy governor of the People’s Bank of China, told the Sixth China Payment and Clearing Forum. “The government will significantly ease market access and push forward the opening of e-payments.”

China will give overseas-funded financial institutions “pre-establishment national treatment,” which means equal treatment with domestic companies, Fan said.

As the use of mobile payments expands, so too the competition to develop and adopt new technologies.

Companies are actively bringing innovation to the sector. Past breakthroughs have included QR code scanning, now the most popular way to pay in China; “near field communication” payments such as Apple Pay, which can complete a payment with just proximity to a machine; and biometric payment systems, which can recognize voices, faces or other individual human characteristics.

Technologies that can recognize a user by an individual trait can be combined with artificial intelligence to improve both convenience and safety for consumers.

“Innovation in retail payments can offer tangible benefits to consumers beyond convenience,” said Jerome Powell, a member of the Fed Board of Governors nominated to serve as next chairman of the US central bank. “Improvements in security, such as our ability to authenticate consumers and detect fraudulent transactions, are also possible through innovation.”

Mastercard’s Ling said partnerships are important in seizing the opportunities of the cashless society.

Alliances between various players in the sector are increasing. Restaurants, convenience stores and shared bike operators, among others, are targets of payment companies seeking to build new partnerships.

WeChat Pay and Alipay have set up partnerships with bus systems in major cities. Metro lines, railways and taxis are cooperating with Tencent or Alibaba on systems that allow users to pay with smartphone applications.

Shanghai Metro is collaborating with Alibaba to bring voice and facial recognition technologies to the world’s longest rapid-transit system. Alibaba is actively working on a mobile payment system for the Beijing subway, and the Guangzhou metro system formed an alliance with WeChat Pay in November.

But for consumers, it all boils down to cash or cashless daily lives.

“The biggest competition is not among digital payment companies but with traditional cash payments,” said Ling.


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