Who Is Alipay For?

Xiao Fang

At the end of a cab ride in Singapore last month, the driver recommended that I pay with Alipay. “You’ll get a special deal,” he said. Just as in Chinese mainland cabs, he handed me a QR code to scan and I paid in Singaporean dollars, with Alipay making the exchange from Chinese renminbi on the spot and even comping me 50 yuan.

Over the next few days that I was in the city I had a similar experience on several occasions. Restaurants, stores, and even airport duty-free shops well known among Chinese tourists all had Alipay on offer as a payment method, and with special deals. Tallying up all of the offers I came across, I could have racked up 600 yuan in money back from Alipay.

But of course, it’s all targeted at Chinese tourists.

It’s not only in Singapore, though. Chinese travelers this year to other hot destinations like Hong Kong, Thailand, Taiwan, and Japan all have been met with Alipay QR codes in restaurants and shops.

According to data from Ant Financial (Alipay’s parent), spending abroad through Alipay during the national holiday in October was more than eight times what it was last year, while spending per person rose nearly 50%. The main driver of that is people born in the 1990s, making up to 44% of spenders abroad, shelling out an average of 1301 yuan.

The payment revolution begun in China is spreading overseas, all because Chinese tourists prefer to use mobile rather than credit cards. Even Japan’s financial institutions have taken note, and are preparing to roll out mobile payment methods of their own.

As Alipay has globalized, it has eased things for Chinese tourists while traveling internationally by expanding its footprint with overseas merchants. In the past two years, Alipay’s parent company Ant Financial has obtained licenses in Hong Kong, India, Malaysia, and other countries, while developing localized versions of the Alipay app.

But that has not meant that Alipay has won many non-Chinese users. As of August of this year, users of Alipay’s international version numbered 40 million—yet that is in contrast to the 520 million active users within China, as of June.

In Hong Kong, Singapore, and elsewhere, people still rely on more established card-based payment methods, not their phones. Habits don’t change that easily, after all. Add to that the need for licensing and localization, and China’s mobile payments services face a tough uphill climb in gaining acceptance outside of their home turf. Recently, there’s even been some pushback in Hong Kong, with some arguing that the local Octopus Card (a contactless smart card originally made for use with public transit, but since expanded to be usable at many stores) is plenty good enough, and no one needs Alipay.

Globally, Alipay’s real competitors are the likes of PayPal and Apple Pay. But even in the US, where PayPal and Apple Pay have the advantage, mobile payments still lag far behind China. Data from Dow Jones in September showed that China’s mobile payments sector is 90 times larger than that of the US.

That gap has consequences inside of China as well. I paid a visit to Beijing’s Silk Street, a major site for foreign tourists, and every store, no matter if it was a coffeeshop or a clothing boutique, had WeChat and Alipay QR codes prominently displayed. By contrast, only a few had Visa logos.

Over the course of half an hour in one tea shop where WeChat, Alipay, and even JD and Baidu mobile payments were accepted, almost every non-Chinese customer paid in cash. In part that’s because they can’t easily register accounts with Chinese mobile payment apps.

At a clothing store that accepted Visa cards, the owner said that most foreign customers still opted to pay with cash, only a minority choosing to swipe their cards. Taking that into account, Silk Street’s information desk offers currency exchanges.

For non-Chinese users, Alipay still has not made any special effort to either attract or accommodate them. Baidu, on the other hand, has very quietly been working on something.

In July, Baidu struck a partnership with PayPal. For now, it mostly consists of helping Chinese users make international purchases. But according to one of Baidu’s team, the possibility of helping foreign tourists in China to use mobile payments is also under consideration.

“For overseas users, we will later be providing PayPal, Visa, Mastercard and other payment options, while also allowing Chinese merchants to settle in renminbi. At the same time, PayPal has bought Braintree, the largest foreign aggregation payment platform, used by Uber, Airbnb, Booking.com and others, and we hope to make our own merchants available to users coming to China for travel through them.”

Statistics show that in 2016 there were 138 million tourist entries to China. If it can capture even a part of that group, Baidu’s payment service will find space for survival.

By contrast, Alipay’s promotion among overseas users seems to be mostly in the form of ecommerce transactions. In Russia, Brazil, and other countries that buy heavily through Taobao, Alipay has already forged partnerships to make itself locally available.

On last year’s Singles’ Day, Alipay logged a 60% increase in international trade, with customers hailing from 224 countries and territories. Among them, Russia stood out, making up 48% of all international transactions.

This year, Alipay extended its presence even further. For example, in the Philippines, the local version of Alipay teamed up with the country’s second largest retailer Ayala’s Glorietta Mall to offer specials to offline shoppers. In Hong Kong, Alipay HK worked with convenience stores 7-Eleven and Circle K, as well as Standard Chartered Bank, so that when topping up their Alipay HK balance, users would get red envelopes that they could use for Singles’ Day shopping.

But as it’s seeking to attract users abroad over ecommerce, Alipay is also putting itself forward for services, such as paying ride fares and redeeming promotions.

Meanwhile, it continues its international expansions apace. Now in 30 odd countries and territories, Alipay has made it so that Chinese tourists can continue to use mobile payments, just as they’re used to, even when far from home.

Outside of China, Alipay has already covered almost every consumer venue imaginable. It’s now in the US and Europe, Japan and South Korea, Southeast Asia, Hong Kong, Taiwan, and many other places, its logo popping up in restaurants, supermarkets, department stores, convenience stores, theme parks, and airports. It’s even onboard Finnair’s China-bound flights, as well Norwegian and Carnival cruise ships.

And so Alipay now handles 27 different currencies, while platinum members enjoy better exchange rates.

Curiously, after Alipay extended itself to larger retailers abroad, smaller shops began using it as well, often based off personal accounts just like domestic Chinese shops are wont to do.

A caviar seller in Hong Kong observed that mainland shoppers often asked to scan a QR code, and so he sought out a mainland relative to help set up an individual Alipay account just for that purpose.

Whether it’s Alipay or WeChat Pay, the challenge for expanding abroad seems not to be merchants, but users. Merchants in locales that receive plenty of high-spending Chinese tourists are happy to embrace Alipay, but what use is it for local consumers?

It’s not just a problem of shifting consumer habits away from credit cards and cash, either. For Chinese mobile payment services, one of the barriers to their gaining wider acceptance abroad is the requirement, imposed by law in July of last year, for real name registration and verification. The requirements are determined by the type of account, which the law differentiates as follows:

Type I: mainly used for small payments, and so limited to a maximum of 1000 yuan;

Type II: used for daily expenses, transfers, purchases, utility payments, etc. Not to exceed more than 100,000 yuan in a year;

Type III: for larger financial transactions, but still capped to making a total of 200,000 in payments a year.

Practically, most everyone would need at least a type II account, and that requires three types of verifiable information for approval, such as a personal ID card, bank card information, telecom service registration, and so on.

Most people outside of China would only be able to provide a personal ID—any passport would do—but wouldn’t have a Chinese bank card or phone number that could be accepted by the system.

Not to mention that, if Alipay and WeChat Pay are to serve users outside of China’s borders, then they must also be able to satisfy the laws and regulations of wherever those users reside. And if there’s a conflict between the legal requirements, what then?

This isn’t just a problem for Chinese payment companies, as all international payment systems face the same difficulties. Even PayPal has had to divide itself into a complicated corporate structure to comply with international settlement rules.

But with merchants onboard, and Chinese tourists carrying them abroad, China’s homegrown mobile payment services may yet gain some traction in international markets.