China hasn't exactly opened its arms wide to embrace U.S. payments companies, but the nation has gradually become more accepting of the foreign payments businesses that view its tech-savvy population as a lucrative market.
American Express confirmed last week that the People’s Bank of China formally accepted its application — a joint venture with Chinese mobile payment provider Lianlian Group. Amex had worked with Lianlian six years ago in allowing the Chinese mobile provider to incorporate the Serve platform into its network.
It's a wise move for Amex to continue that partnership, because American card brands or mobile wallet providers will find the country fairly tough sledding because its brands of UnionPay, WeChat Pay and Alipay dominate the mobile and e-commerce landscape.
American Express, or any other payment provider that is ultimately accepted to operate in China, doesn't have to contend with a chaotic mobile payments landscape in China, where the market is already dominated by just two brands. Alipay, with over 400 million users, and WeChat Pay, with 1.4 billion users, cover nearly 90% of the population.
Those wallets are so widely used that an Aite Consulting Group forecast predicted in the coming years these mobile payment models could overtake plastic card payments in China.
At the same time China is opening its markets to U.S. companies that adhere to the country's rules, it is seeking to put limits on QR-code spending. Both Alipay and WeChat Pay use QR-code technology to support mobile payments.
QR codes are typically seen as an easy way to deploy mobile payments without the technological or business hurdles of working with a phone's secure element for NFC. But perhaps it's a bit too easy — it appears Chinese regulators want to keep closer tabs on what is occurring behind the scenes of QR-code payments, as they generally fear that third-party developers could somehow be providing the technology for those products.
Alipay is operated by Ant Financial, the payments affiliate of Alibaba, which has built a powerful e-commerce empire in the country. It reported having more than 488 million active users at the end of the third quarter of 2017 (this is well over the entire population of the U.S., which the Census estimates at just over 327 million).
Still, those seeking to find a way to obtain more transactions from Chinese consumers will point to any progress they are making and view it as a starting point that could lead to bigger stakes.
Last week, Apple CEO Tim Cook acknowledged that Apple Pay was showing good growth in the country, mainly because it was becoming a method by which Chinese commuters could pay for mass transit fare.
Alipay's greatest strength is its huge enrollment base. Enrollment is the key to any financial collaboration or merger because the enrolling party has more control over user data, and as such can demand better financial terms and gain more revenue from the cross-selling and marketing that is the main goal of most payment partnerships.
Amazon, for example, uses the enroll/control strategy to its advantage. Amazon is considering a checking account that would involve a bank partner—likely a large bank such as Capital One or JPMorgan Chase—but Amazon would control the accounts, giving the retailer the upper hand. Amazon offers debit perks for its Prime members, but the perks are structured to encourage loading and routing to an Amazon stored-value account, which de-emphasizes card brands and again gives Amazon control over the data. Amazon can do this because of its huge enrollment base. It doesn't share a lot of detail about specifics, though it's estimated Prime has about 65 million members.
Alipay is 10 times as big, at 600 million users. Alipay's user base is also more than that of six companies combined: PayPal, the three "Pays," Venmo and Zelle. Ant rivals WeChat and Facebook Messenger both have about a billion users each, though they are not strictly payment apps but social programs that embed payments for certain purchases.
Taking various issues into account, from political to technological, U.S. companies overall understand that obstacles exist in making a dent in China's e-commerce and mobile landscape.
In a 2017 Global E-Commerce Leaders survey of business leaders seeking a presence in China, most cited their inability to drive revenue through their own websites as the toughest challenge.
Not far behind as a major concern was lack of control over the technology, or the reliance on third-party partners.
As many businesses and consumers have been forced to deal with the difficult conditions thrust upon them by the COVID-19 pandemic, so too have fraudsters needed to make adjustments just to continue their life of crime.
As the pandemic has stretched on further into 2020, with more lockdowns and economic disruption predicted heading into the fall and winter, continuing to offer fee waivers has not always proved financially viable.