Will mobile payment change the way we purchase? – Analyzing the Chinese Market

What is mobile payment?

Consumers will stop carrying wallets in the near future. They will be walking with a handphone in their pocket, to replace cash, coins, and all their credit cards.

Some retailers are already welcoming these consumers with open arms, for more secure payment with lower transaction costs, and increased customer engagement. Basically, mobile payment brings the online payment paradigm to offline shops and as examples of this reality, the major players in the US in mobile payments are Paypal, Google or Apple. 

In China, two big retailers are far ahead of their competitors; the undisputed leader Alibaba with Aliwallet (支付宝), followed by Tencent with Tenpay.

How does it work?

Consumers can use their handphone as an electronic wallet, payment method, and encryption device. Just install an App, create an account, transfer money to the account, or link it to a credit card, and you’ll be ready to pay with your smartphone in 5 minutes.

Paying with a mobile phone reduces the friction and makes it more fun and quicker to pay. With that being said, compulsive shoppers will be wise to set -up payment limits; it is easy to configure, and will save you from crazy shopping.

In the shop

There are several modes of transaction:

• Account validation: the shop assistant scans a code on the consumer phone,
• Transaction validation: the consumer scans a code at the Point Of Sale.

Both can offer the same level of security for the consumer. They can set up limits above which they need to confirm each transaction.

What about security?

There are security issues, for both the buyer or the seller, with all payment methods: cash, cheques, credit cards, etc. Mobile payment increases the overall level security for both, the shop and the consumer. The consumer can use fake currency or forged cheques, while the vendor can take an imprint of a credit card. Both the Point of Sale and the consumer phone must be connected for the transaction to be approved and confirmed by the payment gateway.

Customer identification

Mobile payment solves the complex issue of offline customer identification. Retailers have developed complex and costly methods to identify offline consumers since traditional payments are not an efficient method  (a cheque can be used to match a name but requires manpower, cash offers no identifcation, and PCI compliance forbids storage of credit card numbers).

However, some mobile payments offer a unique identifier:

• Alipay gives a username, which is also the username of the tmall and taobao ecommerce platform.
• Tencent offers the wechatID, which links to user activity on the mobile social media WeChat.
• Apple pay does not provide the AppleID of the consumer, making it less attractive to retailers.

Is it urgent for retailers to offer mobile payment?

Mobile payment is a plus for the user. The payment process is faster than cash, cheque, and similar to credit card. In addition, consumers love retailers who give them choices and this is a new choice to offer to customers. So, the real question is ‘Why should any retailer choose to ignore mobile payment?’. The solution is available now. There are a few obstacles to the adoption of mobile payments, for example:

• Mobile payment providers have different registration processes, and manage bank accounts and legal entities in rigid way.
• Traditional POS solutions are slow to adopt this new technology, which can force retailers to install other solutions, disconnected from their main Retail System.

The good news is that all these issues have been solved in the Openbravo ecosystem. Taking advantage of Openbravo’s open architecture, System in Motion, gold partner in Greater China, developed a generic mobile payment module, and a connector to Alipay. This module is available to all Openbravo Commerce Professional & Enterprise users and it is already used by Openbravo Commerce customers in China. Besides that, a Tenpay extension is in design for publishing in 2015. Any other payment gateway can be developed as an extension, by official Openbravo partners.