The rise of mobile payments is considered a threat if we take into account the fact that the access to data is viewed as crucial to newly emerging financial and consumer business models.
According to Ant Financial, payments through its Alipay unit bypass China UnionPay, the state-owned settlement network with close ties to the central bank.
The result is that UnionPay, along with issuing banks and acquiring banks, is haemorrhaging income from merchant fees. The trend is fuelled not only by the rise of e-commerce but also by the dramatic increase of mobile payments to offline merchants such as supermarkets and restaurants.
More than that, the move by more Chinese consumers to switch from swiping plastic cards to scanning QR codes with mobile wallet apps knocked USD 20bn from banks’ fee income in 2015, according to a Shanghai-based fintech consultancy.
Most users of Alipay, and rival WeChat Pay owned by Tencent, fund their payments by linking their traditional bank accounts to mobile wallet apps. That means traditional bank deposits are still the ultimate source of funds. But when a consumer uses Alipay or WeChat for payment, banks do not receive data on the merchant’s name and location. Instead, the bank record simply shows the recipient as Alipay or WeChat.
The loss of data poses a challenge to Chinese banks at a time when their traditional lending business is under pressure from interest-rate deregulation, rising defaults, and the need to curb loan growth following the credit binge . Big data are seen as vital to lenders’ ability to expand into new business lines.
In a sign that banks recognise the importance of data, China’s big four state-owned commercial lenders have each launched their own e-commerce platforms in recent years. Rong E-Gou, the platform run by Industrial & Commercial Bank of China, the country’s largest lender by assets, has 30m users and reported turnover of Rmb870bn last year.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now