Managers need to push for mobile payment options
On November 11, “Singles’ Day” in China, Alibaba Group, owner of the South China Morning Post, processed a record US$17.8 billion in sales across the country. Of that, 82 per cent – about US$15 billion – was conducted through mobile devices. Mobile payments are certainly here to stay in China.
This should come as no surprise. Last year, Chinese consumers made more payments through mobile devices than computers, according to the latest research from Euromonitor International. Chinese consumers are expected to spend US$559.6 million in mobile payments this year.
China is well ahead of the United States on this front. Sixty per cent of consumers in North America use cash at least weekly to make purchases at a merchant location. Indeed the regular use of mobile payments in the US is relatively flat, according to the recent Accenture North America consumer digital payments survey of more than 4,000 smartphone users in the US and Canada. But there is optimism that digital payment options will start becoming more common soon.
Similarly, mobile payments in Hong Kong are not all that readily available. That said, it is even more reasonable to anticipate the uptake of digital payments – from mobile to digital wallets – to gain traction in Hong Kong as more mainlanders expect similar services and mobile penetration is high in the city.
Managers of payments providers have not done enough to persuade customers of the value of switching and of the benefits that it may bring. For banks, the case for making digital payment options available and encouraging uptake is that they need to do it before they are disintermediated by competitors such as Alipay or PayPal. But that means banks need to remove active disincentives in place such as charges for interbank transfers but not for writing a cheque.
For merchants’ management teams, there are multiple reasons for embracing digital payments: if you do not offer convenient, alternative services that your customers want (and we know from usage statistics that mainland customers expect them), then your competitor that offers these services will take business away from you. Furthermore, you risk alienating the digital native generation who expect the companies they do business with to be as hip and switched on as they are. And digital payments provide a footprint of valuable customer data that you cannot track with cash payments.
But it is also key to attract Hong Kong residents who do not quite get the benefits of digital payments yet. Strong rewards programmes are an option. Offering digital services as part of the payments experience can also give consumers incentives to switch from cash to digital payments.
Consumers are most interested in seeing current account or credit card balances when making purchases with third-party apps, getting alerts on incoming bills to avoid negative balances, and aggregating and categorising spending across accounts to better understand personal spending patterns. This benefits everyone: the customer gets convenience, the payment provider builds business, and the retailer obtains better customer insights into spending habits.
The case for pushing digital payments is one of retaining future customers. Management teams need a long-game vision on this, and not a quarter-by-quarter lens. But if they lose sight of the value proposition, Singles’ Day should serve as a reminder. Those one-day sales were not driven by cash, or even credit cards. Mobile payments made the difference.
Chris Harvey is managing director of financial services for Asia-Pacific at Accenture