China’s Millennials Are In The Mobile Payments Driver’s Seat

Not only is China armed with millions of tech-savvy millennials who rely on their mobile devices for almost anything and everything, but these young consumers are demanding simpler ways to pay.

The country’s millennials are driving huge trends in China’s mobile payments and commerce ecosystem, with the potential to unlock even more growth as adoption continues to surge.

ACI Worldwide joined PYMNTS to provide some insight into the market and how millennials are influencing mobile payments both in China and all over the world.

PYMNTS: China’s millennials and the mobile payments market: short-term or long-term trend?

ACI: This is a long-term trend. The move toward “in-app” purchases and the number of Chinese residents with smartphones is staggering, approximately 550M, while the number of millennials with smartphones is estimated to be 200 million, according to Statista. Not all millennials in China have the same characteristics: Balinghou (post ’80s) and jiulinghou (post ’90s). The post ’90s cohort is a digital native and has grown up with a device in their hand. Of the millennials, the jiulinghou will drive mobile payments and commerce.

The population is demanding simplicity, so the trend can accelerate with simple payment pages and localized payment methods.

PYMNTS: A forecasting analyst says that nearly 200 million Chinese consumers make payments with their smartphones, and that’s just a small fraction of the country’s overall potential as a driver for the payment method. Where do you see this heading?

ACI: This volume will double in the next five years due to the number of consumers with smartphones, as well as those who are close to mobile payments. For example, there are 450 million active users of Alipay.

Additionally, there is an aggressive battle for market share between Alipay and WeChat Pay (owned by Tencent). As they look to convert users to their payment platform, they will make incentives based on discounts.

Our estimates show that Alipay has a market share of 82 percent, WePay 11 percent and Lakala Pay 4 percent. We are expecting the market share of each company to change as more players emerge. Apple Pay, Samsung Pay, Xiaomi Pay and Huawei Pay are all making aggressive moves to get market share.

PYMNTS: Will millennials influence how solutions providers support their appetite for mobile payments?

ACI: Yes, as merchants start to optimize their devices and embrace an omnichannel strategy, millennials, particularly the jiulinghou, can start and complete their transaction from the mobile device. With the increases in screen size, shopping online will be made easier.

We must consider the headwinds facing mobile payments. The government is tightening up regulation and security compliance. This will ensure that providers will make more investments, possibly impacting the user experience. We see the following challenges that providers must overcome:

• Improve mobile payment security
• Comply with Chinese government regulations (e.g. AML)
• Increase the volume of profitable cross-border transactions versus less profitable domestic transactions
• Systems that can scale to handle the increase in volume

PYMNTS: Moving stateside for a minute, how do you see millennials in the U.S. shaping and making mobile payments?

ACI: There will be two key drivers of growth: peer-to-peer payments and mCommerce.

As more millennials come of age, they will use their device (the one they always have on them) to conduct simple, small payments.

As apps are built with mCommerce at the forefront, millennials will demand simple and secure payments to go with the easy-to-use and navigational apps. For example, “one touch payments” popularized by Amazon, will become the norm.

PYMNTS: Looking at the rest of the world, where else will millennials make an impact on mobile payments?

ACI: Latin America has an estimated 80 million millennials who have grown up with mobile devices. In a recent ACI study focused in India, we found 67 percent of millennials who work in FinTech shopped on their phone in the last month. Combined with a staggering 40 percent per annum growth in eCommerce sales, India will be a market in which millennials will drive mobile payments.