China leads the way in mobile payments

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In China, more so than in any other country, consumers are leaving their wallets and credit cards at home. A survey by global market research specialists Ipsos has revealed that in 2017, more than seven out of every 10 people in China made use of a virtual wallet. This compares to only about five out of 10 in the U.S. and three out of 10 in Japan.

Whether it's shopping, buying a meal in a restaurant, calling a taxi, purchasing cinema tickets or paying utility bills, almost every aspect of life can be managed via a virtual wallet on a mobile phone. In 90 percent of cases, this service is provided by either Wechat Wallet or Alipay, the two most commonly used mobile payment means in China.

With everyone jumping on the mobile payment bandwagon, figures are truly astronomic. By the end of the third quarter of 2018, China's third-party mobile payment market was already worth around 120 trillion yuan (18 trillion U.S. dollars). It's all but certain that the total for the whole year will be in excess of 150 trillion yuan. Cashless payment is clearly taking over.

“It's easy to understand,” explains Professor Liu Zhiqin from leading financial think tank, Chongyang Institute for Financial Studies at Renmin University of China. “China has a huge population, they just prefer to have easier access with new technology. And secondly, mobile payment will be seen as a fashionable activity in a modern society, which people are eager to take.”

Yet, as with any new online technology, questions have been raised about security. Reports have emerged of various scams involving mobile payment. In one case, the QR code on a shared bike was replaced, and the money is thus re-directed into a swindler's account. And transfers can sometimes go to the wrong recipient by mistake.

This is one reason why Alipay, in August 2018, updated its system to enable a transfer delay – a function rival WeChat had already introduced. Transfers can be frozen mid-transaction if the suspicions of either the sender or the mobile payment company are aroused. The money is returned to the sender if an investigation reveals unlawful activity.

“We've taken account security as a top priority,” said Fanny Wu, spokesperson for Ant Financial, formerly known as Alipay. “We have developed a series of technologies to ensure account security, for example AI. So, powered by technology, we have a very low fraud rate, which is five in ten million, which is much lower than the average level of the other leading financial or payment institutions.”

However, Professor Liu is skeptical. “They have some security problems,” he said. “Your personal data is always released or discovered in the transaction because, by each payment, you have to give your number, even give your ID number on the ID photo. You don't know in which point this data will be leaked and then be misused by some people there. Personal data must be well secured, and not for misuse.”