NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, January 15, 2015

There’s plenty of differences between the mobile commerce market in the U.S. and the mobile ecosystem seen in China.

Starting with the more than 520-plus million people estimated with smartphones in China versus the 160-plus million estimated in the U.S., numbers are the first major difference. But that’s not the only big difference. In the U.S., it’s payments and technology companies vying for the top spot on mobile payment services. In China, it’s the major third-party Internet and e-commerce companies leading the way.

In the U.S., most of the buzz about mobile payments is focused on Apple Pay and what it’s done to re-energize the market. In addition to the payments networks like Visa and MasterCard and Discover, companies like Apple and Google and PayPal are hard at work convincing the American public that paying with their smartphones should be second nature. In China, the world’s largest smartphone market, the pitch is being accepted by more consumers. Companies like Tencent and Alibaba are already developing innovative ways to drive mobile commerce to its platforms and they’re seeing significant growth.

While Apple has focused on using Apple Pay to sell more iPhones, companies like Tencent have found a way to embed payments in services that consumers are already using. Messaging and socialcommerce, in particular, is one way the Chinese company has given the country’s mobile ecosystem a new boost by providing new ways to make mobile transactions through its social network WeChat. The company has also used TenPay’s open platform approach to help banking customers make mobile payments in ways banks haven’t done. TenPay has a base of more than 650 million active users, making the case for it leading how Chinese companies are leading mobile payment services.

“We don’t take any cuts,” said Tenpay General Manager Jim Lai. “That’s a very strong way of showing that we take our open platform approach in a serious way so our partners and the whole ecosystem can benefit from it. We’re trying to do what banks are not doing efficiently.”

While third-party companies dominate mobile payments in China, Apple and Android still want their hands in the Chinese mobile payment ecosystem. In September 2014, it was announced that Apple and China’s UnionPay agreed to partner on a mobile payment service that will bring the bank card organization’s app to iPhones nationwide. The system is designed to follow standards set for QuickPass by the People’s Bank of China. Later in 2014, UnionPay announced it was also working on an Android payment app to join the Apple Pay implementation. That Apple-UnionPay move is expected to launch in early 2015.