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Mobile Payment: Boon and Bane

Apr 15-2020   



 

Mobile payment in China has been nothing short of a revolution, leading the world in such parameters as user number, technology, and transaction, said Mr. Wang Xun, adjunct researcher of the NSD, in his lecture for the Digital Finance Open Class Series.

 

Mr. Wang traced the exponential growth of mobile payment in China and credited Alipay as the main driving force. A milestone was crossed in 2003 when Alipay was launched by Alibaba as a way of guaranteeing transactions on its platform. In 2010, Alipay worked with the Industrial and Commercial Bank of China to make fast payment possible. The adoption of new technologies such as smart phones, mobile networks, and QR codes further boosted online sales. In 2013, Alipay unveiled Yu Er Bao, a de facto monetary fund that provided its users with liquidity and returns, thus signaling the onset of China’s digital finance. Since 2013, mobile payment has been growing on a tear in China. Between them, Alipay and WeChat Pay had amassed around 1 billion active users globally by the end of 2018. In cities, 90% of residents use mobile payment as the primary payment method.

 

Besides the boost from new technologies, mobile payment might have benefited from the relatively lax supervision environment and the insufficient supply of traditional finance institutions. Up to 2015, the central bank was supportive of mobile payment and the overall market situations favored the development of third-party payment firms in the hope of ameliorating payment in rural areas and facilitating the growth of medium, small and micro-enterprises. However, the loose oversight was not without downsides, evidenced by the unregulated mushrooming of P2P platforms.

 

Mobile payment has engendered profound changes. For residents, it offers a low-cost real-time way of remittance, thus enhancing their utilization of social network and improving their risk-sharing ability. Research by the Digital Finance Institute at Peking University corroborates that in areas with higher degree of digital finance, per capita consumption shows less dependence on and sensitivity towards per capita income.

 

On the international front, Alipay had extended to merchants in 55 countries and regions and developed nine digital wallets with local partners by 2018. Digital payment might be an effective way of strengthening the interconnection between China and Southeast Asian countries, said Mr. Wang.

 

Despite its boon, some problems have cropped up. The first one is the ownership of data, which remains undecided. Mr. Wang believed that ownership of data should be rooted in the protection of user privacy. The second issue is inequality in the sense that foreign visitors to China might find themselves in inconvenient situations of payment. The third one is monopoly. Alipay and WeChat Pay have a combined market share of over 90%, making monopoly a relevant topic. The fourth one is supervision, for mobile payment platforms have taken on the features of financial holding corporations. At stake are the lawful rights of financial consumers.

Mobile Payment: Boon and Bane

Apr 15-2020   



 

Mobile payment in China has been nothing short of a revolution, leading the world in such parameters as user number, technology, and transaction, said Mr. Wang Xun, adjunct researcher of the NSD, in his lecture for the Digital Finance Open Class Series.

 

Mr. Wang traced the exponential growth of mobile payment in China and credited Alipay as the main driving force. A milestone was crossed in 2003 when Alipay was launched by Alibaba as a way of guaranteeing transactions on its platform. In 2010, Alipay worked with the Industrial and Commercial Bank of China to make fast payment possible. The adoption of new technologies such as smart phones, mobile networks, and QR codes further boosted online sales. In 2013, Alipay unveiled Yu Er Bao, a de facto monetary fund that provided its users with liquidity and returns, thus signaling the onset of China’s digital finance. Since 2013, mobile payment has been growing on a tear in China. Between them, Alipay and WeChat Pay had amassed around 1 billion active users globally by the end of 2018. In cities, 90% of residents use mobile payment as the primary payment method.

 

Besides the boost from new technologies, mobile payment might have benefited from the relatively lax supervision environment and the insufficient supply of traditional finance institutions. Up to 2015, the central bank was supportive of mobile payment and the overall market situations favored the development of third-party payment firms in the hope of ameliorating payment in rural areas and facilitating the growth of medium, small and micro-enterprises. However, the loose oversight was not without downsides, evidenced by the unregulated mushrooming of P2P platforms.

 

Mobile payment has engendered profound changes. For residents, it offers a low-cost real-time way of remittance, thus enhancing their utilization of social network and improving their risk-sharing ability. Research by the Digital Finance Institute at Peking University corroborates that in areas with higher degree of digital finance, per capita consumption shows less dependence on and sensitivity towards per capita income.

 

On the international front, Alipay had extended to merchants in 55 countries and regions and developed nine digital wallets with local partners by 2018. Digital payment might be an effective way of strengthening the interconnection between China and Southeast Asian countries, said Mr. Wang.

 

Despite its boon, some problems have cropped up. The first one is the ownership of data, which remains undecided. Mr. Wang believed that ownership of data should be rooted in the protection of user privacy. The second issue is inequality in the sense that foreign visitors to China might find themselves in inconvenient situations of payment. The third one is monopoly. Alipay and WeChat Pay have a combined market share of over 90%, making monopoly a relevant topic. The fourth one is supervision, for mobile payment platforms have taken on the features of financial holding corporations. At stake are the lawful rights of financial consumers.