What Britain can learn from Alipay’s super-app revolution?
This article is by Rita Liu, Chief Commercial Officer at Mode Banking.
You may never have heard of Ant Financial, the Chinese payments giant that will soon float in what could become the world’s biggest IPO – but you will probably have heard of its mobile app.
Alipay allows users to do anything and everything from buying an airline ticket to topping up their mobiles to investing in shares. Together with arch-rival WeChat, these two so-called ‘super-apps’ are used by more than a billion consumers across China.
How does that compare to the UK? It’s fair to say that Britons have been slower to adopt digital payments. For instance, 257 million cheques were processed in 2019, a small increase on the previous year. Debit cards continue to be the most popular method of payment, having overtaken cash in 2017. COVID is helping to close the gap.
Research shows the use of cash has halved since the pandemic began, partly as more retailers switch to contactless payments exclusively, but also as consumers worry about health and safety and switch to online shopping. Steps to make it easier to use contactless- such as increasing the limit to £45- have expedited the process.
But there is plenty the UK could do to make it easier and cheaper to buy and sell goods and services, which will benefit businesses and consumers alike. Let’s start with the payments industry, which is plagued by pain points and inefficiencies. When you use your card to buy a coffee, for example, it’s approved within a matter of seconds.
That sounds pretty efficient, right? In some ways it is. But that approval process can involve several steps and intermediaries along the way, including a payments gateway, an acquiring bank, the card company and your own issuing bank. Each step incurs fees and the more steps involved means the higher the chance of a transaction getting declined. That’s frustrating for consumers and bad business for retailers.
While this would be an important problem pre-COVID, now it is even more so. The pandemic has wrought financial havoc on hundreds of thousands of SMEs across Britain. Many are pivoting their business from a more traditional bricks-and-mortar model to embrace e-commerce.
High payment fees, in addition to the pricey physical equipment that many card companies can press on businesses, make the migration substantially harder. This makes a mockery of one of the central aims of open banking, which is to boost financial inclusion.
One solution is to offer businesses and consumers a mobile wallet solution, by leveraging the power of open banking to offer direct or account-to-account payments between merchants and shoppers, cutting out the middlemen and saving hundreds of millions of pounds in card fees a year. So in theory, consumers could ditch their debit cards and use their mobile wallet to pay the local restaurant directly for a takeout.
This is when it gets interesting! Merchants can leverage their closer relationship with consumers to better understand what they really want. They can combine those insights with their payment savings to provide targeted offers to their customers, directly through the mobile wallet, so that the users can have an integrated, frictionless payment and loyalty experience, which is the only solution fit for the era of digital commerce we live in.
Instead of being disintermediated by card companies and banks, businesses can now nurture deeper relationships with their customers that go beyond simple transactions. By accessing deep behavioural insights, they can offer highly personalised rewards to drive loyalty from high-value customers.
Whilst the path is clear, plenty needs to be done before we reach this point. For instance, customer use of open banking has doubled in six months, but that’s still only one million users out of a population of 67 million.
However, merging fractured and inefficient ecosystems into one will allow users to reap the benefits of payments and loyalty in one super-app, and empower businesses to enjoy the benefits of pooling data across a consumer’s entire purchasing, spending, saving and investment lifecycle.