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China’s Mobile Payments Phenomenon

By Mike Faden

With astonishing speed, China has become by far the world’s biggest user of mobile payment services, with implications for U.S. companies doing business with Chinese customers.

In 2016, China’s mobile payments more than tripled in value to roughly $5.5 trillion, according to market-research firm iResearch.1 That’s nearly 50 times the value of the U.S. market for mobile payment services, based on Forrester Research’s estimate of $112 billion for 2016 U.S. mobile payments.2 China’s startling 2016 growth rate of 215 percent (from iResearch) was also more than five times the U.S. growth of 39 percent (from Forrester). This comparison is challenged by the fact that the statistics come from different sources which may define “mobile payments” differently, but a review of many other sources indicates that the comparison is directionally correct.


This article explores the factors propelling China’s extraordinary mobile payments growth.


The Rise of China’s Mobile Payment Services


Several factors are contributing to China’s growth in mobile payments, which typically are defined as any transactions made by mobile phone, whether for e-commerce or at a physical location.3 They include the rapid growth of e-commerce, the spread of smartphones, the relatively low adoption of other payment methods such as credit cards, and the availability of mobile payment services from China’s big Internet companies.


E-commerce has expanded rapidly in China, although not as fast as mobile payments overall: according to iResearch, China’s e-commerce rose 23 percent to about $3 trillion in 2016. B2B sales accounted for about 70 percent of the total, with small-to-medium enterprises taking the largest share.


Much of that e-commerce volume is handled by smartphones. China is already the world’s largest smartphone market, accounting for almost one in three smartphones sold worldwide – and it’s still growing faster than many other countries, according to market-research firm IDC. In 2016, users bought some 467 million smartphones; shipments increased nearly 9 percent, compared to global average growth of just 2.3 percent, as local manufacturers vied to take market share and attract customers with full-featured yet lower-priced phones.4,5


But the use of smartphones at physical retail locations has taken off rapidly too. That’s partly because credit cards have not been adopted widely, in contrast to developed markets like the U.S. and Europe, experts say. “China’s rapid adoption of proximity payments [payments at point-of-sale terminals] is in part thanks to its late-mover advantage — unlike the U.S. and other regions, China does not have a strong entrenched credit card culture. In effect, China has jumped directly from cash to mobile payments,” according to market-research firm eMarketer.6 In addition, according to the Financial Times, online payments with debit cards in China can be cumbersome, usually requiring additional authentication methods such as text messages and random code generators.7


The number of people using phones to pay at the point of sale in China more than doubled in 2015 to 134 million, according to eMarketer, which projected that number would rise to 195 million in 2016 (compared to 37.5 million in the U.S.).8 The trend is particularly obvious in urban areas, where even street musicians and market stalls often accept mobile payment services, according to the New York Times. “Almost everyone in major Chinese cities is using a smartphone to pay for just about everything,” as a Times article put it, noting a rapid shift from reliance on cash to ubiquitous mobile payments has occurred in just three years.9 “It has become the default way of life now,” said Shiv Putcha, an analyst with the research firm IDC. “Literally every business and brand in China is plugged into this ecosystem.”10


Part of the reason so many businesses can accept mobile payments is the adoption of QR codes for payments, in addition to the Near Field Communications (NFC) technology generally used to support mobile payments at retail outlets in the U.S. Quick Response (QR) codes – square patterns that act like two-dimensional bar codes – are widely available, but have not been adopted in most developed nations with the same speed as they have in China. With QR codes, sellers don’t need point of sale terminals; sellers can accept payments simply by printing out and displaying QR codes, which are scanned by customers’ smartphone cameras to initiate the payment process.11


Critically, QR codes are supported by the mobile wallet-based payment services operated by two of China’s biggest Internet companies, which together accounted for more than 90 percent of mobile payments in China in the fourth quarter of 2016.12 Both those companies, Alibaba and Tencent, already play large roles in Chinese users’ online lives. Alibaba is best known for its e-commerce marketplaces; its Alipay payment service is used to pay for goods on those platforms and is now also used elsewhere, including retail locations. Tencent provides payment services integrated into its widely used WeChat messaging app and its social-media platform.13,14 Beyond the revenue earned directly from processing fees, China’s Internet companies gain valuable user data that can be used for other purposes, from credit ratings to targeted advertising and product development.15


Some observers note that not all of the massive increase in Chinese mobile payments is due to real economic activity. China’s payment services have successfully promoted their use to replace physical “red envelopes” in a traditional holiday custom, in which millions of Chinese exchange small envelopes of cash back and forth, with most users receiving the same amount that they send.16


Implications for U.S. Companies


The growth of mobile payments in China has implications for U.S. and Chinese companies, the New York Times notes. U.S. companies seeking to sell to China may benefit from finding ways to utilize the major Chinese mobile payment services, for example; conversely, Chinese companies looking to sell in other countries may need to add support for the payment services used in those countries.17 To address these issues, some payment services used in the U.S. are beginning to integrate support for Chinese payment services.18



China has adopted mobile payments at an extraordinary pace, quickly becoming the world’s largest user of mobile payment services. The mobile payments environment is an important consideration for U.S. companies seeking to do business with Chinese customers.

Mike Faden - The Author

The Author

Mike Faden

Mike Faden has covered business and technology issues for more than 30 years as a writer, consultant and analyst for media brands, market-research firms, startups and established corporations. Mike also is a principal at Content Marketing Partners.



1. “China's Third Party Online Payment GMV Soared 62.2% in 2016,” iResearch;
2. “China mobile payments dwarf those in US as fintech booms, research shows,” Financial Times;
3. “Mobile Payment,” Gartner Inc. IT Glossary;
4. “Top 3 Chinese Smartphone Vendors Grab Nearly Half of China's Market in 2016, says IDC,” IDC;
5. “Apple Tops Samsung in the Fourth Quarter to Close Out a Roller Coaster Year for the Smartphone Market, According to IDC,” IDC;
6. “China Boasts World's Largest Proximity Mobile Payments Market,” eMarketer;
7. Ibid.
8. Ibid.
9. “In Urban China, Cash Is Rapidly Becoming Obsolete,” The New York Times;
10. Ibid.
11. “Deep Dive: Mobile Payments In China,” Fung Global Retail & Technology;
12. “Race for China’s $5.5tn mobile payment market hots up,” Financial Times;
13. “Deep Dive: Mobile Payments In China,” Fung Global Retail & Technology;
14. “Race for China’s $5.5tn mobile payment market hots up,” Financial Times;
15. “China mobile payments dwarf those in US as fintech booms, research shows,” Financial Times;
16. “China's digital giants engage in 'red envelope' wars,” Financial Times;
17. “In Urban China, Cash Is Rapidly Becoming Obsolete,” The New York Times;
18. “Stripe adds support for Alipay and WeChat Pay, China’s top digital payment services,” TechCrunch;

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