Think Tank: Alipay’s Long Game — Global Expansion?
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Alipay is one of the dominant forces in Chinese mobile payments solutions, but its ultimate goal, like with any payments company, is global expansion. This most noticeably came to the world’s attention when Alibaba secured a major expansion into the U.K. via their partnership with Barclaycard, but Alipay’s been in the game of taking its mobile payments solution beyond Chinese shores for far longer.
The opportunity is pronounced here, with Alipay connecting global merchants with more than one billion Alipay users around the world, especially Chinese travelers abroad. Of these travelers, 69 percent used mobile payments last year, according to Nielsen.
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There are a few key reasons for this expansion to take place, and as a front line participant in this effort, I’ve gained some insight into how it is being accomplished, given that my company, RiverPay, connects Alipay as an authorized provider to more than 12,000 store locations and more than 30,000 points of sale in the U.S., Canada and Europe.
That’s but one of the reasons Alipay (and its competitors, WeChat Pay and China UnionPay’s mobile app) are quickly going international.
Payment Platforms Are Becoming “Must Have,” Not “Nice to Have”
North American and European merchants know well the impact Chinese consumers can have, who spent $115 billion during 130 million overseas trips in 2017. But the key to capturing these dollars is making payment an easy and familiar experience. The Nielsen report shows that by accepting payment made through platforms familiar to Chinese consumers like Alipay, retailers can see an increase of up to 60 percent in foot traffic and sales.
From our first-hand experience working with thousands of merchants, we have found they have a few things in common when first exposed to Alipay and WeChat Pay. Once they understand the value brought by QR-code payments and the tangible benefits of adopting Alipay and WeChat Pay, they’re more willing to implement or expand their acceptance of these power platforms.
Word-of-mouth between merchants matters for widened adoption (or let’s call it what it is: peer pressure). When merchants see their head-to-head competition adopting Alipay and WeChat Pay and enjoying the extra foot traffic and revenue they bring, it’s hard for them to just ignore it and not think of adding it themselves.
This can really be illustrated through the hypothetical example of a Chinese tourist stopping at a North American or European store and seeing an item he really likes. He can pay in cash (the most expensive option for him, plus the most insecure and least convenient), use Visa or Mastercard (not much penetration in the Chinese market), or use Alipay or WeChat Pay, the most favored payment options for Chinese consumers.
There’s really only two outcomes here: he pays with Alipay or WeChat Pay, or he leaves without making a purchase. This is becoming the reality for Chinese consumers shopping overseas, and many North American or European merchants are already experiencing the same frustration. They need a solution to make the adoption of these payment platforms as simple as possible.
Even a Behemoth Can Use Some Help
While familiar to Chinese merchants, all three of the “Big 3” of Chinese payment platforms are still fairly new to North American and European business, and there needs to be a ground battler to win over the hearts and minds of merchants.
This one-to-one interaction at the store-level is the important link in the chain where payments enablers like RiverPay come into the process. So I want to provide some insight into how we act as a one-stop shop for solutions to support merchants in their adoption of Chinese mobile payment platforms.
We educate merchants on what Alipay and WeChat pay do, and what benefits that get from adopting these platforms – we’re sort of an evangelist for Alipay, WeChat Pay and China UnionPay in the overseas markets where they’re all aggressively expanding.
Payments enablers are valuable from a technology and support perspective, integrating the mobile payments platforms into merchants’ existing cashier systems with no technology overhaul needed from the merchants. This is done by customizing, installing and testing each solution, both in-store and online, to resolve the “last mile” of integration.
In addition to customer care, payments enablers also provide the settlement service and take care of the transaction processing, licensed to conduct money settlement from Chinese currency to U.S. dollars, Canadian dollars, Euro, British pounds and more. For our platform, merchants usually get their money within four days of a transaction.
Enablers can also engage in marketing initiatives and promotional campaigns on behalf of clients, and it’s this precision marketing that’s one of the true untapped benefits of integrating with mobile payments platforms.
Data: The Next Generation of Mobile Payment Platforms
Essentially, the precision marketing made possible by Alipay and WeChat Pay boils down to giving merchants a more accurate understanding of who their users are. Merchants get anonymized data provided by the payments platforms with quantitative indicators such as demographic background, allowing Alipay, WeChat Pay and payments enablers to draw deep consumer insights from everyday transactions.
Because these payment service providers are the literal connection between the merchant and the payment method, they have the data behind consumers shopping habits at specific points of sale and are able to utilize that information to create a customized shopping experience. For example, these platforms can notify consumers when they are near a store where they’ve recently shopped, or recognize that the consumer bought a fur coat and may be interested in a matching scarf. Working in conjunction with travel planning apps and services — such as Ctrip, the popular Chinese tourism app — they can suggest retail, dining or attractions options near the destination where the clients are traveling, before they even leave China.
Service Is King
From my point of view and experience, the payments business is no longer a competition on price. While some merchants can be price-sensitive, at the end of the day, most are going to care more about the payment convenience and security, the huge purchasing power of users, and the value-added services, such as those based on transaction data.
The core reason for Alipay’s rapid expansion internationally all boils down to its ability to deliver on technological capabilities, product innovations and superior services. Specifically, in the payments industries, mobile payments in China have gone through changes and developments in the past five or six decades that the Western World has not. Because of this, the payment industry in North America and Europe will be reshuffling in the years to come, with new opportunities for merchants helmed by Alipay, WeChat Pay, China UnionPay and the payments enablers that make it all possible.
Ryan Zheng is chief executive officer and cofounder of RiverPay Inc.
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