How to pay for goods and services in China: WeChat and Alipay wallets 

The Chinese market has been very closed for quite a long time, and general public outside of China couldn’t say much about it. The overall conservatism of the country and total replacement of all international goods and mobile applications with local ones had a significant impact on the financial system as well.

In China, everything is local — from mobile phones to its own internet, which is inaccessible to foreigners. The same way payment methods operate in the country. They are also unique and do not share international payment habits and systems such as Visa and Mastercard. Today, we will discuss main features of Chinese payment systems and most used electronic wallets in the country.

WeChat and Alipay

The main players of the Chinese payment ecosystem are WeChat and Alipay wallets. Both applications were created based on existing platforms that were tied initially to another purposes. However, wallets have gained a loyal audience and now cover more than 50% of all transactions in the country. So, you can imagine the turnover.

WeChat (微信) is a multifunctional mobile application developed by the Chinese company Tencent. It was launched in 2011 as an instant messaging service that can be considered a Chinese version of WhatsApp. Almost all online communication in the country takes place through this messenger. In addition, it is used for selling goods and services, business communication, and even more: some services are not available without registration in the WeChat app.

Subsequently, the messenger turned into a full-fledged platform for performing various operations, including mobile payments. WeChat Pay is an in-app wallet that allows users to make various financial transactions, such as paying for goods and services, transferring money to friends, and many others. Payment on merchant websites also takes place through the wallet, practically any product on a Chinese website can be bought using WeChat, which cannot be said about a bank card.

Alipay (支付宝) is a mobile payment system developed by Chinese company Ant Financial, a subsidiary of Alibaba Group. Alipay was launched in 2004 as a payment system exclusively for Alibaba's online stores, but later became a full-fledged payment and financial platform. Alipay allows users to pay for goods and services, transfer money, invest, keep funds in a savings account, and much more.

Both payment systems use QR code technology to make payments. To pay for goods or services, user simply needs to scan the seller's QR code, enter the amount, and confirm the payment. NFC technology can also be used for payment in stores through contactless payment.

QR codes are widely used around the world, and here Chinese is the closest to other countries. Payment method that has reformed the entire financial system of Brazil — PIX, is also based on this same technology. The convenience and simplicity of this mechanics show exceptional value for the financial system worldwide, despite various new developments in this area.

Why these wallets became so popular

When considering core reasons for the popularity of WeChat and Alipay among Chinese people, we can highlight several main factors:

• Convenience: Both payment systems provide users with convenient and fast ways to perform various financial transactions. Registration process is simple, and all transactions are instant. This is exactly what is required of mobile payments.
• Security: WeChat and Alipay use modern security technologies to protect users' financial data and have already earned user’s trust. For a financial instrument, this is one of the most important issues that need to be covered to win over the audience, and WeChat and Alipay have fully succeeded in this. This is mostly due to the fact that creators of the wallets are well-known businesses in the country that have been around over many years.
• Multifunctionality: Both payment systems provide users with a wide range of financial services, from paying for goods and services to investments and savings. Everything in one place is something many of today's products strive to, and not without reason. Users are tired of huge number of services and applications that consume memory on devices and complicate their lives. It is much easier to aggregate the main services in one place and also receive bonuses connected to this.
• Wide distribution: WeChat and Alipay are commonly used in China, and many stores, restaurants, and other establishments accept only these payment systems. Situation in online payments is more than the same; wallets are the first payment methods at checkout.

At the same time, some Chinese use also bank cards. However, we cannot compare the volume of payments with cards to the volume with wallets is, as card payments count for extremely low volumes. Why is this happening?

Reasons lie in the financial system itself and payment habits are formed directly because of it. For someone from the CIS or Europe, it is quite unusual and strange that payment by card is unpopular and is the second choice when it comes to online or even offline payment.

In CIS, for example, access to banking is provided for majority of population, and obtaining a bank card is not difficult. Most of the working-age population has an account in at least one bank, while many have accounts in several banks. Opening an account for individuals is a simple procedure with straightforward result. At the same time, in many countries, things are completely different. Opening an account may be associated with lengthy bureaucracy and stress. Also, an opposite situation may take place. In Latin American countries, for example, society was unbanked for a long time because of low level of trust to the banking system as a whole. There are few stable banks, and people simply do not trust them with their finances. In this regard, alternative payment methods appear and provide the necessary service at the right time meeting the audience's current needs.

In China, in turn, almost 70% of the population has a bank card, but only some of all cards are active. The reason is that most Chinese people choose to pay in a convenient way, namely through a wallet that is always nearby in their favorite services. Although access to banking is open, it is simply not favourite.

This is why conducting in-depth analytics of payment methods and systems before entering a new market is so important. Although the Chinese population has easy access to the banking sector, not everyone is interested in using it for daily purchases, and this knowledge significantly affects development of e-commerce and other businesses in the country. If you are looking to always provide convenient and popular payment methods in any GEO of operation, contact Monoup for payment analytics. We will help you get a quality analysis quickly and implement the best strategies in practice.