Is the Mobile Payment Industry a Purely Chinese Miracle?
COVID-19 and China
Image credit: Christiann Koepke/Unsplash

For the past few years, mobile payments have been attracting lots of attention in the fintech sector. Global unicorns have been born that allow innovative daily payment methods and preferences both for individuals and businesses. China has been indisputably regarded as the most important emerging market for mobile payments , and the United States is never ignored when mentioned the fintech category – therefore these market leaders are showing the crucial development stages and the results that should be expected.

In an overview, China's mobile payment transaction volume hit USD 7.89 trillion in the third quarter of 2019, while the US had a capacity of USD 114 billion for all of 2019. In 2018, the user number was nearly 600 million and 58.7 million respectively. The total transaction volume and total users number are very different; it's clear that mobile payment is a national trade method among Chinese.

Not only from the overview of usage, but the capital flow is also showing great interest in this sector in China. According to CrunchBase, a total of nearly USD 38 trillion investment from global investors has poured into this area since 2014. At the same time, the US generated an investment amount of roughly USD 16 trillion. While the US's investment consisted of nearly 580 companies, only 49 Chinese companies were invested. In 2020, over the first three months, the investment into this hot sector continued despite the onslaught of the coronavirus. These two countries, with a total of 34 companies, saw investment of over USD 1 trillion.

The comparison between market players in these two countries will give us a glimpse of the vast differences ranging from payment habits to credit systems established during the development of digital payment.

Markets vary a lot

Driven by capital and market demands, decacorn was born in this wave. The most widely known one, Ant Financial, was initially a payment tool for online shopping and now has grown into a cross-area daily life service provider platform. The US's star unicorn is Stripe, providing enterprise payment processing with API infrastructure. Cooperating with big companies like Amazon, Apple, Facebook, and covering over 30 countries all over the world, it is a persistent draw.

This industry scale and features vary a lot in the two biggest economies, which can be seen in several aspects. In 2018, about 80% of Chinese consumers used various forms of mobile payment solution, which was much higher than the 10% application rate in the United States. The business coverage of mobile payment companies also differs a lot. China is more like a 'players all-round' situation, whereas the US companies focus on vertical areas such as alternative lending, digital wealth management, insurance, and many others. Meanwhile, Alipay was not satisfied with payment, and moved into areas like wealth management and consumer finance. Stripe announced last September that it would step into loans for smaller online companies.

Factors shaping scales

Four main aspects are developing mobile payment scale and development in these two countries.

Credit card system development

Card payment has played the primary role in the arena of payment. In 2018, the US's leading payment methods – like credit card, cash and debit cards – had nearly 80%, 79% ,and 60% adoption, respectively. The most accepted mobile payment is PayPal, with 44% adoption rate.

The smartphone penetration rate and credit card rate per capita all indicate that, as an emerging market in mobile payment, China has much space for progress. The US's two indexes are all pretty high, and with the already existing credit card payment adoption, it's hard to shake them. As technology giants such as Google, Apple and Amazon launch their own mobile payment schemes, Apple Pay has the highest adoption rate of 9%, and the market doesn't give too much response to the other two. Giants think that they are similar to technology giants like Alibaba and Tencent; they all sit and enjoy plenty of users all over the world. But the fact is that this way hasn't worked for several years.

Payment habits and financial education

Just like Alipay and Tenpay teach users to use mobile payment as a daily routine, banks teach their clients to use cards as a daily habit. And this habit lasts far longer than the mobile payment habit in China, just like in the chart, the US users hold an average of nearly 4 credit cards while China only has almost 0.5.

Industry incumbents' fintech-related strategies

China's financial incumbents are mostly state-owned and support the progress of mobile payment a lot with transfer settlement and authentication. Yet the incumbents in the US ­– such as Zelle and Chase – choose to lift their own technology to hold mobile payments in their own hands. Zelle has users of 27.4 million and is expected to grow more than 73% in 2019 compared to 2018. And Zelle is catching up with its main competitor Venmo which a 'bank outside' player focusing on transfers between friends.

Regulatory environment

Regulation in China is looser than in the US. China's mobile payment regulation started to become restricted in 2017. Even now,  there are still some institutional gaps in industry supervision which are not binding on payment institutions, although at least 81 mobile companies received (in Chinese) a total of CNY 120 million fines. The laws in the US have a relatively complete legal supervision system. Federal legislation includes the 'Electronic Funds Transfer Act.' The Federal Reserve Board also promulgated 'Three Regulations' – also for the supervision of trading processes and many others.


Although these two countries differ a lot from many aspects of the mobile payment industry, their future road has something in common. The 'to B' focus contains potential, as shown by Tencent injecting CNY 200 million into B2B digital payment company Leyaoyao this January. And the US was on the road of 'to B' business back in the beginning. The final winners will be varied and unpredictable, it seems, with China producing technology giants and the US wielding its 'too big to fail' banks.

Editor: Luke Sheehan

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