Mobile devices are playing an increasingly important role in the financial industry because of their immense potential to act as a platform for a plethora of financial transactions. There is a flurry of activity around both payments and banking, with investments, operator adoption and development of innovative solutions driving the market...
Maverick China Research estimates less than 25% of China's 400 million mobile users have access to m-payment services, and less than 2% are active m-payment users.
"China's m-payment industry is stuck in a rut, with little consumer demand and no comprehensive network of operators, banks and merchants available that can match the selection, prices and convenience of online or bricks-and-mortar payment," observed Dave Carini, analyst at Maverick China Research.
Rather than pooling their limited resources together to benefit the industry as a whole, China's m-payment service providers are going at it alone, each aiming for total domination of the market.
"While they do continue to make progress in this area, user growth continues to lag behind," he said.
Why hasn't m-payment taken off in China? Carini has identified several reasons.
For one, cash is king. "Convenience, security and ingrained habit all continue to make cash the preferred payment method, even for many large transactions."
Aside from those in Beijing, Shanghai and other large cities where debit and credit cards are increasingly common, most Chinese consumers are content with the current cash-based system.
Another barrier is the complexity of the ecosystem of partners needed to deliver the services in the first place.
M-payment service providers have a tough job making and maintaining the necessary network of partnerships with banks, merchants and mobile operators.
"Each partnership needs to be negotiated separately, and even with large companies, these deals often cover just one province or city rather than nationwide," Carini explained. "For users, this means that a service offered in one province might not available in another; for MPSPs, this can make establishing nationwide partnerships an extremely difficult endeavor."
To jumpstart the market, Maverick suggests that companies start with simple m-payment services - with as few partners as possible - and grow their user base before rolling out ambitious m-payment schemes involving contactless payment or similar cutting-edge technologies.
The "logical fit" is to provide mobile top-ups, letting users add value to their mobile accounts without having to purchase top-up cards. "Mobile top-ups are an ideal way to get Chinese consumers to start seeing their mobile phones as a payment device," Carini says.
