In Hong Kong’s airport, Alipay’s azure blue logos began appearing two years ago greeting travellers from China who rely on the popular payments app back home. In recent months, taxis started to show the logo. Now stores and boutiques have them.
They’re all signs of a battle brewing in Hong Kong that will test whether a Western-style financial system — based on banks, credit and debit cards — can fend off a pair of apps that have come to dominate how people spend and send money throughout China. If Alipay and WeChat Pay can expand into the city and win new customers there, why not in Europe and the US, too?
“It’s going to be a battleground here,” said James Lloyd, a Hong Kong-based FinTech specialist at consultancy EY. “The next 12 to 24 months, we’re going to see a very significant shake-up of the consumer payments and retail banking market.”
The two payment apps flourished on the mainland by offering millions of people who were underserved by banks an easy way to store and use their money via mobile phone. By last year’s Q4, payment apps handled 37.7 trillion yuan ($5.9 trillion) of spending in China, up 28% from just three months earlier, according to research firm Analysys International. Alipay handled 54% of that, followed by Tencent’s 38%.
Hong Kong, in contrast, already has a fully developed Western-style banking system, as well as a popular alternative, the re-loadable Octopus card. The brightly coloured cards are widely used for public transport and in convenience stores. Now, the apps from neighbouring China are threatening to uproot that status quo.
While Alipay and WeChat Pay started their expansion abroad to ostensibly help Chinese travellers, the expectation across the financial industry is that the apps will use the infrastructure they build to attract locals next — a pattern that’s starting to emerge.
In Hong Kong, there’s heavy pressure for vendors to accept the apps. People from the mainland accounted for 72% of overnight visitor spending in the city in 2017, doling out $16.5 billion while stocking up on cosmetics, luxury goods and other items, according to the tourism board. As merchants sign up, it opens the way for residents to participate too
Thousands of miles away, US banks are fortifying their own positions for the apps’ arrival. Last year, dozens of big US lenders including JPMorgan Chase and Bank of America banded together to offer a new P2P payments app called Zelle. Credit card companies have sweetened rewards programs, hooking customers on perks that will make them think twice about using apps instead.
At the same time, Alipay has been inking deals with US payment processors that will allow it to expand in America, ostensibly to help Chinese travellers. Late last year, its logos began appearing in New York City taxis.
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