Home quarantine policies to curb the spread of Covid-19 in China have been a boon for most digital services, including remote work apps, e-learning and mobile gaming, but one online technology has not fared so well: mobile payments.
The problem started during Chinese Lunar New Year holiday in January, when most Chinese stayed at home after coronavirus lockdowns were imposed across the country. That hit mobile payments hard because shopping malls, stores and restaurants – which account for the bulk of transactions through Tencent’s WeChat Pay and Alibaba’s Alipay – were closed or had to severely curtail their business, according to a study by market research firm iResearch.
“When people cut their offline consumption during the virus [outbreak], the mobile payment business was hurt,” said iResearch analyst Zhang Yu. “But it will rebound in the second quarter when stores start to reopen and people go back to work.”
Tencent Holdings said that WeChat payment activity dropped sharply during the Lunar New Year holiday amid the outbreak of the pandemic but rebounded in the following week.
“We have seen a recovery in March … supply is coming back although there is still some suppression of demand,” James Mitchell, Tencent’s chief strategy officer, said on a company earnings call last month.
Offline businesses have been the major driver in China’s mobile payments boom because almost all bricks-and-mortar merchants in the country accept QR code scans or face scans to process payments, leading the push towards a cashless society.
Offline scan-to-pay transactions have grown 15 fold over the past three years, reaching 9.6 trillion yuan (US$1.3 trillion) in the fourth quarter of last year, according to iResearch, which did not disclose first-quarter data.
With 800 million phone users and easy to use apps like Alipay and WeChat Pay, Chinese people have embraced digital payments – 86 per cent of the population use their phones to pay for everything from clothes and food to hailing taxi rides.
However, before the coronavirus outbreak, growth in the volume of mobile payment transactions was slowing, with a 13.4 per cent year-on-year rise in the fourth quarter to 59.8 trillion yuan, as the market became saturated after two years of high growth.
China’s mobile payment business is dominated by Alipay whose market share expanded in each quarterly period last year to reach 55.1 per cent in the fourth quarter, boosted by the November 11 Singles’ Day online shopping festival.
Alipay is operated by Ant Financial, an affiliate of Alibaba Group which owns the South China Morning Post.
Tencent’s mobile apps WeChat Pay and QQ wallet, also known as Tenpay, held a combined 38.9 per cent share in the fourth quarter, while Ping An Group’s Yiqianbao was in third with 1.5 per cent.
“The market share [of players] will remain stable in the foreseeable future but there are seasonal fluctuations,” said Zhang. “Shopping festivals like Singles’ Day in November will help Alipay obtain more share in the fourth quarter, while WeChat Pay always has a better performance in the first quarter when people use WeChat for red packets [to give away money] during Chinese New Year.”
The stable competitive landscape does not mean competition in mobile payments will ease, added Zhang. “The battlefield in future will centre on 2B, or services to businesses, shifting from the focus on consumers,” he said.
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This article China’s mobile payments to see rebound as offline vendors reopen after coronavirus lockdowns first appeared on South China Morning Post