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Fine China: How the West can learn from the Eastern digital payments space

'East vs West'. Both a cultural and geographical term, it signifies the divide between, Asia, India and the Middle East (the 'East') and Europe, America, and Australasia (the 'West').

But the East vs. West split doesn’t just belong in the history books. In fact, we can even use this dichotomy to better understand the retail and card payments industry, and learn a thing or two from our Eastern counterparts.

Looking at contactless limit and mobile wallet usage data from around the world, we at Expert Market identified some key lessons that Western payment industries should take away from what the East is doing.

There’s a distinctly Western tendency to see our super-sized spending societies as the way forward, leading the world towards new, more convenient payment technologies. But how accurate are these assumptions? What do the actual trends tell us about the economic growth of the West compared to its opposite hemisphere? And what do we need to do to keep up?

Mobile wallets dominate in China

China’s economy is booming. With an annual real GDP growth rate of 6.9% in 2017, China boasts the 15th fastest growing economy on the planet. So what is it about the way that money changes hands that has stimulated the nation’s ongoing economic growth?

The first reason is mobile wallets.

The digitisation of the payment space has seen a meteoric shift towards payments using mobile wallets. And in no other country in the world has it caught on as much as China.

In 2017, mobile wallets made up 36% of all POS transactions in China, and this number is only going to rise. WeChat Pay and Alipay in particular have a duopoly on the Chinese market, boasting more than 1.5 billion users combined.

And if 36% doesn't seem like that much, think again. The percentage of payments made using mobile wallets is higher in China than anywhere else in the world; this percentage is greater than the next seven countries in the research combined, and is a staggering six times more than the second highest, India (6%).

Asia raising the bar for contactless

The second reason China’s payment industry is fuelling its economy’s rapid growth relates to its contactless card limit – the second highest in the world. Consumers can fly through stores, splashing out almost $150 at a time without so much as a blink.

This vast contactless limit and the popularity of mobile wallets are just two ways in which the Chinese government is driving the digitisation of the payments space. China has created an infrastructure that empowers its citizens to go cashless, and the result is a booming, fertile economy that’s growing year on year. And the trend extends to its Eastern neighbours, too.

Asia’s contactless limits are the biggest in the world. Japan, Singapore, Hong Kong, Malaysia, and Thailand dominate the standings, with contactless caps ranging from $45 to more than $175.
 

Asia has also been considerably more interested in using mobile wallets than the Western world has. Of the top 15 countries where mobile wallet payments are most widespread, seven are from the East (China, India, UAE, Indonesia, Hong Kong, Singapore, and Japan).

What else do these countries have in common? Well, they’re growing faster than the UK, the US, and much of Europe. India is third highest in the world for GDP growth and Malaysia fifth, while 2017 saw Indonesia grow an impressive 5.2%.

What it all means

Asia’s trends demonstrate what a willingness to embrace digital payments – by retailers, governments, and above all, consumers – can do for economic growth.

The US and Europe, by contrast, sport miserly contactless limits, and have likewise seen more limited economic growth. Mobile wallets haven’t caught on, either; rates of adoption are low across Europe, and they account for only 3% of all payments in the US, and 1% in Canada.

If Western countries harbour dreams of keeping pace with China and boosting their own economic growth, they need to think bigger.

From an international perspective, China represents more than a fifth of the world’s population. We need to recognise the colossal opportunity inbound Chinese tourism presents – and adopting the technology to accept the favoured payment method of more than a billion Chinese people is a good start.

Meanwhile, domestically, small businesses in Western countries need to work out quickly how they can start accepting payments in a sphere that will only become more digital. Even in the UK, three million small business still don’t take card.

The same governmental push taking place in the East isn’t happening in the West. The responsibility of catalysing change and preparing for a cashless society lies in the hands of business owners. And it’s not a responsibility they should take lightly - because SMEs without the ability to accept mobile wallet and contactless payments aren’t long for this world.

Thankfully for those in the business space, though, there’s a range of card machines for small business options out there that are cheap and easy to use. Customers now expect to pay with card, and our businesses have to follow suit. How? By offering them more dynamic ways of paying, in a world on its way to ditching cash entirely.

It’s time to start thinking differently in the West, and learn a lesson from the best.

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