Micropayments Go Macro

Zhang Lijuan

Today， digital and online payments cover almost all aspects of daily life in China. Office workers use their mobile phone to scan a Quick Response Code （QR code） to pay for a range of services， from taxis to lunch to shopping.

The global management consulting firm McKinsey & Company concludes that China has become the worlds largest mobile payment market. According to a survey conducted in China， 26 percent of respondents carry no more than 100 yuan （US$15.8） in cash， while 14 percent do not take any cash at all and make all payments via mobile phones. As much as 84 percent of all mobile payment transactions are executed through QR code scanning. As cashless payment becomes a part of daily life in China， Chinese mobile payment service providers are beginning to set their sights on overseas markets， including neighboring countries in Southeast Asia.

Promising Prospects

With Chinese online payment platforms expanding into Southeast Asia， QR code payment is now being promoted in countries across the region.

In a National Day Rally speech on Aug. 20， 2017， Singapores Prime Minister Lee Hsien Loong stressed that Singapores plan to build a “smart nation” cannot be realized without the development of mobile payment. As an example， Prime Minister Lee noted that ComfortDelgro， the largest taxi operator in the country， has already introduced Alipay as a payment option in all its 15，000 cabs.

Run by Ant Financial， an affiliate company of Chinese e-commerce giant Alibaba， Alipay is the worlds largest mobile payment platform. It first entered the Singaporean market in September 2015， and now customers in Singapore can use the application in thousands of local businesses， covering the catering， hotel， retail and tourism industries. Despite the growing popularity of the app， 80 percent of micropayments in the country are still made in cash.

Like Singapore， 85 percent of Malaysias micropayments are conducted in cash. In an effort to promote cashless payment nationwide， Malayan Banking Berhad launched its QR code mobile payment system in December 2017. At present， a partnership launched between the central bank of Malaysia Bank Negara Malaysia and the American multinational financial services corporation Mastercard is aiming to deploy a total of 800，000 point-of-sale terminals for QR code payment across the country by 2020. In July of last year， Touch ‘n Go， a leading electronic payment service provider in Malaysia， established a strategic partnership with Ant Financial to jointly develop an e-wallet for local consumers. Touch ‘n Go Card is a prepaid electronic-cash card widely used in Malaysia and the soon-to-be-launched e-wallet will significantly improve Malaysians payment experience.

According to market research conducted by JD Finance， a fintech subsidiary of Chinese e-commerce giant JD.com， cash and credit cards are both widely used for offline payments in Thailand. Researchers also found that with a growing demand for safe， reliable and convenient payment systems， there is tremendous room for improvement in Thailands mobile payment and consumer financial markets.

A recent survey by American multinational financial services company Visa showed that around a quarter of respondents in Thailand are aware of paying by QR code scanning， the highest percentage among Southeast Asian countries， while nearly half of them said they are willing to use QR code payment in their daily life. The survey also found that the three most common scenarios for QR code payment in Southeast Asia are paying bills （50 percent）， shopping in convenience stores （39 percent） and making purchases at grocery stores （36 percent）.

“The QR code will eventually become part of the payment systems in Southeast Asian countries，” said Ouyang Rihui， deputy director of the Institute for Internet Economy Research at Central University of Finance and Economics of China. “On the one hand， Southeast Asian countries and China share similarities in culture， customs and consumer behavior. On the other hand， as Southeast Asia has maintained a positive economic growth in recent years， the e-commerce industry is also booming in this region and customers now have a more open attitude toward trying new things. At the same time， the arrival of more and more Chinese tourists who are accustomed to QR code payment will surely promote the development of this payment method in Southeast Asian countries.”

Chinese Experience as a Guide

According a forecast by the Singapore-based United Overseas Bank， there will be 480 million internet users in Southeast Asia by 2020. As the e-commerce market expands， the region will see increasing demand for mobile payment. At present， banking authorities in Singapore， Malaysia and Thailand are formulating rules and standards for QR code payment. Industry experts suggest that financial institutions in Southeast Asian countries can learn from Chinese mobile payment service providers and apply technologies and policies appropriate to their respective markets.

“The QR code payment is a cost-effective financial technology，” Ouyang noted. “As it matures in China and is being introduced to Southeast Asia， the technology will surely play a positive role in boosting the economy of countries in this region. By promoting the advanced digital payment systems to these countries， Chinese fintech enterprises， such as Ant Financial and JD Finance， have contributed to the development of the world as a whole.”

Chinese mobile payment systems continue to operate smoothly， and Ouyang believes that this positive experience is the most valuable lesson for Southeast Asian countries. Countries in the region can also learn from the Chinese experience in how to build the infrastructure necessary for QR code payment， nurture consumer behavior and improve the payment experience through technical innovations.

In addition to promoting technical upgrades in the barcode payment sector， China has also formulated regulatory measures to contain potential risks. Last December， Chinas central bank the Peoples Bank of China promulgated the Rules for the Barcode Payment Business （for Trial Implementation） and two supporting regulations， the Technical Specifications for Security of Barcode Payment （for Trial Implementation） and the Technical Specifications for Barcode Payment Terminals （for Trial Implementation）. These documents not only define the legal status of barcode payment， the qualifications required by businesses accepting barcode payments and the rules for barcode generation， but also put limits on the sum of transactions which can be made by QR code scanning.

These documents mark Chinas first attempt to comprehensively regulate the barcode payment sector. “With the purpose of regulating the market and preventing financial risks， the new rules announced by the Peoples Bank of China will help to ensure a healthy development of Chinas entire payment industry， and they are also worth learning for Southeast Asian countries，” Ouyang added.