Google steps up global fight for digital wallet as China dominates mobile payments

To get a sense of how pervasive mobile payments have become in China, consider that on the eve of this year’s Spring Festival, 668 million people on Tencent Holding’s WeChat app sent virtual hongbao – digital red packets containing money – to friends and family as part of their well wishes for the new year.

Now western tech giants are accelerating efforts to tap into the market, with Google this week launching Google Pay in a move that rebrands and unifies its previous mobile payment apps as it rolls out new features and plays catch-up with Chinese payment services like WeChat Pay and Alipay.

“China started using credit cards much later, and there were major security concerns with using them for online payments. This allowed mobile payments systems to flourish as they existed independently from vulnerable bank accounts,” said Michael Yeo, research manager for financial and retail insights at IDC.

“Western technology players have been somewhat slower to move into the mobile payments field due to the lack of perceived need.”

Google’s move comes as tech companies across the world scramble to up their game and carve out a slice of the fast-growing mobile payments market. With Alibaba-affiliated Alipay and Tencent’s WeChat Pay focusing on Chinese users at home and abroad, the global market is still up for grabs for companies like Google, Apple and Samsung.

China pulls further ahead of US in mobile payments with record US$12.8 trillion in transactions

From January to October last year, government statistics showed that mobile payment transactions in China amounted to a staggering 81 trillion yuan (US$12.8 trillion), making it the world’s largest mobile payments market. In contrast, the US mobile payments market was worth just US$49.3 billion last year, according to data from eMarketer.

The rebranded Google Pay app replaces its current mobile payments solution Android Pay, and will soon incorporate peer-to-peer payment services from its Google Wallet service, which is currently a stand-alone app that will be renamed Google Pay Send.

Currently, Google Pay users can already make payments in-store by linking credit cards to their smartphones. Soon, users in certain cities like London, Ukrainian capital Kiev, and Portland, Oregon, will be able to pay transit fares with the app.

While features like these may come across as novel for most, they are already part of everyday life for hundreds of millions of users in China, where mobile payments services like Alipay and WeChat Pay dominate.

Since 2014, Alipay and WeChat Pay have implemented in-store payment features, allowing cashiers to scan QR codes displayed on customers’ phones and collect payment.

Peer-to-peer payments have been possible on Alipay since 2012, and on WeChat since 2014.

Last year, multiple cities across China including Guangzhou, Wuhan and Hangzhou started accepting WeChat Pay and Alipay on their transit systems.

Outside China, there are also fewer mobile payments users. Data from Statista showed that Google’s Android Pay had just 27 million users in 2017, while Apple’s own mobile payments service Apple Pay counted 87 million users, making it the front-runner when it comes to mobile payments on digital wallets outside China. But both these are dwarfed by WeChat Pay’s 600 million users and AliPay’s 520 million users.

Why most Hongkongers aren’t yet reaching for their e-wallets

Although Google may seem to be several steps behind China’s Alipay and WeChat Pay when it comes to functionality and execution, the latter two services are still largely China-centric, with either Chinese users or China residents using them.

And while Alipay and WeChat Pay are going international, their main objective is to recruit overseas merchants to their payment platforms, allowing outbound Chinese tourists to settle overseas shopping bills using them.

“Google’s global advantages include its massive user base from anyone who already uses an Android phone as well as its dominant positions in other online services such as search and video,” said Yeo.

“While the China market is not going to feature heavily in their plans due to historical reasons, the rest of the globe will be where they will be pushing for their new Google Pay brand.”

Markets like the US and Europe, which have a mature payments ecosystem of credit and debit cards, are generally slower to switch to mobile payments although this could change as smartphones become more central in daily lives.

“Mobile payments as they exist in Asia have seen limited success in the West, as the ubiquity of credit and debit cards means that mobile payment systems in North America and Europe are at most extensions of existing credit card networks,” said IDC’s Yeo. “The digital wallet which uses currency stored in virtual account as is the form that Alipay and WeChat Wallet take, is rarely seen with any real popularity outside Asia.

Alibaba owns the South China Morning Post.