Alipay Chief Talks UnionPay Strategy

Though state-backed China UnionPay currently dominates China’s payment market, Ant Financial Services President Eric Jing says Alipay (and consumers embracing mobile payments) is diverting billions in fees away from UnionPay.

As Financial Times reported late last week, Ant Financial’s online payments unit, Alipay, is able to bypass UnionPay’s network when mobile payments are processed to offline merchants.

“We think merchant fees in the U.S. payments market are too high, and it’s not normal. Running a business isn’t easy [for merchants]. The fees are too high,” Jing told FT. “The situation in the Chinese market is more normal. Merchant fees are reasonable. Competition between different [payment] market actors is a good thing. It allows service recipients to enjoy better service.”

“So-called offline payments [mobile payments to offline merchants] are still online mobile payments for the user, so the payment model isn’t the same [as bank card payments],” Jing continued.

Compared to the U.S. mobile payments market, China is light years ahead, particularly when it comes to getting consumers on board with actually using mobile payments.

That’s something the U.S. market hasn’t quite found the recipe for. Now, however, it appears the battle between China’s dominating mobile payments companies is getting even closer than before, as other major companies look to partner to help push the mobile payments envelope.

Alibaba-backed Alipay has had the stronghold over the market, with its more than 450 million users. Now, however, Tencent (762 million users) is continuing to make a name for itself, as its WeChat social messaging app with payments capabilities gains steam among consumers. And the companies are working even harder to gain market share before major companies like Apple, Samsung and Google attempt to get a piece of the mobile payments pie.

Data from Euromonitor International, as provided by The Wall Street Journal, shows that mobile transactions in China hit $235 billion last year, which was more than double the year prior. The U.S. market is also seeing strong growth — a 42 percent increase — to $231 billion.