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Born in China and moved to U.S. since college. In my observation, there are several reason for the boom in mobile payment in China that makes it hard to replica

Born in China and moved to U.S. since college. In my observation, there are several reason for the boom in mobile payment in China that makes it hard to replicate. - Low transaction fee & minimal barrier. For merchants taking WeChat pay, the transaction fee seems to be a flat 0.6%, compared to 2%-3% in the U.S. For the food cart vendors and similar one man shops, they just use the person-to-person payment feature (like Venmo), which has no transaction fee and does not need a merchant account. While Square helped somewhat in the U.S., the transaction fee, for many, is perceived as a rip off. - Cards are a pain to use. In the U.S. you sign. In EU you use a PIN. In China you do both. Usually, it seems slower than cash! Mobile payment, comparatively, is a breeze. However, it's quite difficult to argue that taking out the phone, unlock it, open the app and show the QR code is easier than using a card in the western world. There are some deeper historical reasons for these two conditions, which I would not dive into in this comment, but needless to say, it's a much, much more fertile ground for mobile payment to blossom.

abalone 9y ago
> the transaction fee, for many, is perceived as a rip off Only if you're a merchant. Most of the 2-3% fee is transferred to consumers via reward programs. It's important to understand that merchants and consumers face different incentives and that US card networks have aligned themselves with consumers.
- michaelmrose 9y ago
  The merchant is charging more to cover the fees. THEN the user often gets 1% or less back in rewards that are both less flexible and less useful than more cash in your pocket.
  - muninn_ 9y ago
    1% or more is a better phrase. Add to that, if the merchant is charging higher fees then you would have to get everybody to collectively stop using credit cards at the same time, or otherwise every time you use cash you're paying extra on your purchase.
  - abalone 9y ago
    > The merchant is charging more to cover the fees. This is what everyone assumes, but it turns out it's false. We are fortunate to have some experimental evidence on this. In 2003 Australia slashed interchange fees through regulation. Prices did not decline. "...retailers saved more than $400 million (Australian) annually in fee revenue after interchange rates there were cut, but there was no evidence that they passed any of the savings on to consumers. Instead, consumers saw higher card fees, a reduction in loyalty benefits, and the introduction of surcharges of up to 3% on credit card transactions, the report found."[1] [1] http://www.digitaltransactions.net/news/story/Report_-Australian-Merchants-Don_t-Pass-on-Interchange-Savings http://www.digitaltransactions.net/news/story/Report_-Austra...
agumonkey 9y ago
I'd love to know the historical reasons
- HeavenFox 9y ago
  Sure, but this is my personal view, so of course take it with a grain of salt. Capitalism, and hence consumerism, is a relatively recent thing in China, dating only to the 80s. Therefore, the well-developed mechanism in the Western world that encourages and protects it are still lagging. One significant aspect of it is consumer protection. Chargebacks are almost unheard of in China. Fraud protection is pretty much nonexistent. The results are twofold. First, security is an utmost concern, which explains the PIN-and-signature requirement in POS. Second, free of the responsibilities, banks can offer a much more attractive interchange rate. Another aspect is credit is not as developed in China. Of course, culture plays a large part as well, as traditionally Chinese value saving over spending. Therefore, there aren't crazy cash back schemes that American banks offer (credit card points do exist, but nowhere as lucrative), and people don't lose anything by switching to mobile payment, which are basically prepaid cards. These two situations are of course rapidly changing. Younger generations are much more willing to take credit (and you hear horror stories of young girls using their naked pictures as collateral), and more and more company realize consumer protection can be used as a competitive advantage. But mobile payment took foothold before traditional card did, so looks like they are here to stay.
  - agumonkey 9y ago
    Very interesting information. I'm quite interested in the spread of western economics over other parts of the world, China, India, African countries too. I'm not fond of consumerism at all, but the way each country structure and culture absorb it is interesting.
rb666 9y ago
Cards are not a pain in general, only on payments above the contactless threshold. And if you're buying something expensive, you likely wont mind the extra minute for PIN and/or signature.
objclxt 9y ago
To add to this: it's not just low transactions fees for the merchant, it's cheaper payments for the customer as well. Both Alipay and WeChat have spent billions subsidizing and discounting. Go into a restaurant in Beijing and there's a good chance you could get 10 or 15% off your bill by paying with WeChat. So given that it's both cheaper for the merchant and cheaper for the customer it's no surprise it has taken off so much.
- muninn_ 9y ago
  Well yes and this is because they are paying to build the infrastructure out. In the U.S. that infrastructure already exists so there's no need for subsidies. But to add to that, I would love to live in a world where I don't have to play the credit card game, but using cash in the U.S. at least is putting you behind. The prices are the same for an item whether you use cash or not, except with even the worst credit card you can get 1% cash back.
seanmcdirmid 9y ago
> For merchants taking WeChat pay, the transaction fee seems to be a flat 0.6%, compared to 2%-3% in the U.S. Where the heck is 3% even allowed in the USA? > However, it's quite difficult to argue that taking out the phone, unlock it, open the app and show the QR code is easier than using a card in the western world. Tapping the card to the NFC terminal is super easy. You don't even need to take your card out of the wallet if its in front.
- dis-sys 9y ago
  > Tapping the card to the NFC terminal is super easy. You don't even need to take your card out of the wallet if its in front. The whole point here is how to entirely get rid of the wallet. your ID, your cards, receipts, parking tickets etc should all be digital. in fact, that is exactly what WeChat/Alipay are offering or battling for. WeChat based ID card with approval from the Public Security Bureau: https://www.huxiu.com/article/169540.html https://www.huxiu.com/article/169540.html
  - zanny 9y ago
    > should all be digital I don't know what it means, but reading this all I could think was how there is absolutely no way Penndot is ever going to make Drivers Licenses in PA digital. Ever. They only just let people register to renew online like 2 years ago. You still have to drive to the DMV anyway, you can just sign up to get it renewed in advance for "fast processing". State institutions resist technology to a pathological degree. At least in regards to ease of constituent use. They all have websites and have facebook groups and such, but they (by law, usually) never use it to improve the experience interacting with them.
  - weego 9y ago
    I'm more likely to always have a wallet on me than a phone on me. The base notion that a phone is literally essential to daily life but a wallet is not has yet is not a proven assumption.
    - seanmcdirmid 9y ago
usernam 9y ago
In EU you have a pin and you also have to sign the receipt. In supermarkets, cards (debit or credit) queue up the checkout line. Cash is way faster, hands down. I bothered to compare the difference once, since cards here are not the norm. We're talking between 5-10 seconds (cash register) vs 30-45 seconds, most of which are dead times (waiting for confirmation).
- Sukram21 9y ago
  In the EU (at least here in Germany), if you have entered your PIN, you don't need to sign the receipt. If the PIN is not required during payment, then you need to sign. Edit (replying to child): This applies when paying with credit card and EC/girocard. I don't know what you mean by ATM circuit.
  - usernam 9y ago
    You have to note: are you paying with the ATM circuit or with the credit card? The ATM circuit often doesn't require an additional signature (although in some countries like IT it's still required)

abalone 9y ago

> the transaction fee, for many, is perceived as a rip off Only if you're a merchant. Most of the 2-3% fee is transferred to consumers via reward programs. It's important to understand that merchants and consumers face different incentives and that US card networks have aligned themselves with consumers.

michaelmrose 9y ago
The merchant is charging more to cover the fees. THEN the user often gets 1% or less back in rewards that are both less flexible and less useful than more cash in your pocket.
- muninn_ 9y ago
  1% or more is a better phrase. Add to that, if the merchant is charging higher fees then you would have to get everybody to collectively stop using credit cards at the same time, or otherwise every time you use cash you're paying extra on your purchase.
- abalone 9y ago
  > The merchant is charging more to cover the fees. This is what everyone assumes, but it turns out it's false. We are fortunate to have some experimental evidence on this. In 2003 Australia slashed interchange fees through regulation. Prices did not decline. "...retailers saved more than $400 million (Australian) annually in fee revenue after interchange rates there were cut, but there was no evidence that they passed any of the savings on to consumers. Instead, consumers saw higher card fees, a reduction in loyalty benefits, and the introduction of surcharges of up to 3% on credit card transactions, the report found."[1] [1] http://www.digitaltransactions.net/news/story/Report_-Australian-Merchants-Don_t-Pass-on-Interchange-Savings http://www.digitaltransactions.net/news/story/Report_-Austra...

agumonkey 9y ago

I'd love to know the historical reasons

HeavenFox 9y ago
Sure, but this is my personal view, so of course take it with a grain of salt. Capitalism, and hence consumerism, is a relatively recent thing in China, dating only to the 80s. Therefore, the well-developed mechanism in the Western world that encourages and protects it are still lagging. One significant aspect of it is consumer protection. Chargebacks are almost unheard of in China. Fraud protection is pretty much nonexistent. The results are twofold. First, security is an utmost concern, which explains the PIN-and-signature requirement in POS. Second, free of the responsibilities, banks can offer a much more attractive interchange rate. Another aspect is credit is not as developed in China. Of course, culture plays a large part as well, as traditionally Chinese value saving over spending. Therefore, there aren't crazy cash back schemes that American banks offer (credit card points do exist, but nowhere as lucrative), and people don't lose anything by switching to mobile payment, which are basically prepaid cards. These two situations are of course rapidly changing. Younger generations are much more willing to take credit (and you hear horror stories of young girls using their naked pictures as collateral), and more and more company realize consumer protection can be used as a competitive advantage. But mobile payment took foothold before traditional card did, so looks like they are here to stay.
- agumonkey 9y ago
  Very interesting information. I'm quite interested in the spread of western economics over other parts of the world, China, India, African countries too. I'm not fond of consumerism at all, but the way each country structure and culture absorb it is interesting.

rb666 9y ago

Cards are not a pain in general, only on payments above the contactless threshold. And if you're buying something expensive, you likely wont mind the extra minute for PIN and/or signature.

objclxt 9y ago

To add to this: it's not just low transactions fees for the merchant, it's cheaper payments for the customer as well. Both Alipay and WeChat have spent billions subsidizing and discounting. Go into a restaurant in Beijing and there's a good chance you could get 10 or 15% off your bill by paying with WeChat. So given that it's both cheaper for the merchant and cheaper for the customer it's no surprise it has taken off so much.

muninn_ 9y ago
Well yes and this is because they are paying to build the infrastructure out. In the U.S. that infrastructure already exists so there's no need for subsidies. But to add to that, I would love to live in a world where I don't have to play the credit card game, but using cash in the U.S. at least is putting you behind. The prices are the same for an item whether you use cash or not, except with even the worst credit card you can get 1% cash back.

seanmcdirmid 9y ago

> For merchants taking WeChat pay, the transaction fee seems to be a flat 0.6%, compared to 2%-3% in the U.S. Where the heck is 3% even allowed in the USA? > However, it's quite difficult to argue that taking out the phone, unlock it, open the app and show the QR code is easier than using a card in the western world. Tapping the card to the NFC terminal is super easy. You don't even need to take your card out of the wallet if its in front.

dis-sys 9y ago
> Tapping the card to the NFC terminal is super easy. You don't even need to take your card out of the wallet if its in front. The whole point here is how to entirely get rid of the wallet. your ID, your cards, receipts, parking tickets etc should all be digital. in fact, that is exactly what WeChat/Alipay are offering or battling for. WeChat based ID card with approval from the Public Security Bureau: https://www.huxiu.com/article/169540.html https://www.huxiu.com/article/169540.html
- zanny 9y ago
  > should all be digital I don't know what it means, but reading this all I could think was how there is absolutely no way Penndot is ever going to make Drivers Licenses in PA digital. Ever. They only just let people register to renew online like 2 years ago. You still have to drive to the DMV anyway, you can just sign up to get it renewed in advance for "fast processing". State institutions resist technology to a pathological degree. At least in regards to ease of constituent use. They all have websites and have facebook groups and such, but they (by law, usually) never use it to improve the experience interacting with them.
- weego 9y ago
  I'm more likely to always have a wallet on me than a phone on me. The base notion that a phone is literally essential to daily life but a wallet is not has yet is not a proven assumption.
  - seanmcdirmid 9y ago

usernam 9y ago

In EU you have a pin and you also have to sign the receipt. In supermarkets, cards (debit or credit) queue up the checkout line. Cash is way faster, hands down. I bothered to compare the difference once, since cards here are not the norm. We're talking between 5-10 seconds (cash register) vs 30-45 seconds, most of which are dead times (waiting for confirmation).

Sukram21 9y ago
In the EU (at least here in Germany), if you have entered your PIN, you don't need to sign the receipt. If the PIN is not required during payment, then you need to sign. Edit (replying to child): This applies when paying with credit card and EC/girocard. I don't know what you mean by ATM circuit.
- usernam 9y ago
  You have to note: are you paying with the ATM circuit or with the credit card? The ATM circuit often doesn't require an additional signature (although in some countries like IT it's still required)