Banking on a cashless society

More work still needs to be done for residents and retailers here to embrace the latest payment option – the digital wallet

Besides Visa, MasterCard and UnionPay bankcards, two more logos – azure and green – have recently begun to appear at cashier and display windows in retailers here. A clothing store close to Avenida do Conselheiro Ferreira de Almeida and Rua do Campo is one of them. 

“I had the device and system set up earlier this year, providing one more option for Mainland [Chinese] customers to pay,” says clothing storeowner Ms. Wong, pointing at the bright blue and green logos, which represent popular third-party payment service providers Alipay and Wechat Pay.  

“The set-up cost is not expensive as the government and service providers push forward the development of digital payment here,” she added. “So I thought, why not?” 

Amid the government’s efforts to facilitate electronic and mobile payment in the city in recent years more merchants have jumped on the bandwagon to better serve customers from across the border. But some shops and residents are less ready to embrace this new payment option given its less advanced development here, privacy concerns and other considerations. 

In the city’s first official Five-year Development Plan, covering the period 2016-2020, the government laid out its vision to develop the territory into a Smart City – an urban space that uses different types of technologies and electronic data to enhance operational efficiency – followed by a four-year Smart City partnership agreement between the Macau Government and Chinese technology giant Alibaba Group Holding in 2017. And mobile payment is one of the major elements helping turn Macau’s Smart City vision into reality. 

The Macau Economic Services partnered with the local business community by end-2016 to launch a one-month campaign – 1212 Blue Street – encouraging the city’s downtown merchants to accept e-payment platform Alipay, part of the payments arm of Alibaba Group Holding.  

Heavily promoted 

On the heels of the success of the first mobile payment campaign, the authorities partnered local business chambers, third-party payment service providers and others last December to introduce ‘Business Opportunities Everywhere — Festival of Promoting E-Commerce,’ a three-month campaign aimed at further helping local retailers accept mobile payment and conduct e-commerce via various means, including subsidising them to set up different mobile payment devices.  

According to information released by the Macau Economic Services earlier this year about 2,900 third-party payment devices were installed for local small and medium sized enterprises (SMEs) during the campaign, bringing the number of such devices for this sector to nearly 8,000. 

Lei Cheok Kuan, chairperson of the Industry and Commerce Federation of Macau Central and Southern District, which has collaborated with the government in various mobile payment and e-commerce initiatives, says local SMEs have been more willing to accept this new payment option in recent years.  

“More work still needs to be done to better promote the digital wallet among local retailers, who have started to know more about this payment option,” he concedes. 

The aversion to additional work and trouble is the main reason some SMEs refuse to accept mobile payment. “Some think that the business turnover [of that part of the business] is not significant and they don’t want to go through procedures to have the device set up,” Lei reasoned.  

       1,197 yuan 

       Per capita expenditure of Mainlanders in Macau using Alipay this Summer 

A survey conducted last year on mobile payment services at market vendors by Choi In Tong Sam Association, a think tank of the Macau Federation of Trade Unions, shows that only 30 per cent gave the thumbs up to its introduction in their business, while 50 per cent rejected the concept. Concerns about complex procedures to handle the device and the hike in operating costs were the rationale for the cold reception, the survey found.  

Catering to Mainlanders 

“There are actually many benefits to setting up mobile payment platforms besides boosting business,” said Mr. Lei, adding that most of the members of his chamber have the devices installed. “For example, retailers have no risk of receiving fake banknotes and they can save time lining up in banks to deposit money on a regular basis,”  

The chamber head added that the e-wallet is an “irreversible trend” with its prevalence on the Mainland, opining that “that’s where the future lies.” 

Mobile payment has indeed gained traction across the border. Chinese state-run news agency Xinhua reports that mobile payments on the Mainland via platforms like Alipay and Tencent Holdings’ WeChat Pay totalled 81 trillion yuan (about US$12.77 trillion) in the first ten months of last year, compared with 58.8 trillion yuan for the entirety of 2016.  

Mobile payment on the Mainland has enjoyed an annual growth rate of over 100 per cent since 2015, the report says: ‘China’s mobile payment sector has seen rapid development, driven by improved Internet infrastructure, increased use of mobile phones and innovation of financial services,’ it added. 

As Mainlanders are the most important source of travellers for Macau, making up nearly 70 per cent of the city’s visitors, the territory is under pressure to cater to their mobile payment needs. Alipay partnered with local store value card provider Macau Pass to debut its mobile payment service here in 2016, while WeChat Pay collaborated with local third-party service provider UePay to launch its service a year later.  

According to Alipay, per capita expenditure of Mainland consumers in Macau via the mobile payment platform amounted to 1,197 yuan this Summer, representing a hike of 108 per cent from July and August of last year. The volume of transactions made via Alipay in Macau this Summer also nearly quadrupled from the same period of last year. The city ranked as the fifth top overseas destination in terms of Alipay transaction volume in the Summer with Hong Kong topping the table, declared the Mainland company. 

Residents left out 

Despite the presence of Alipay and WeChat Pay in the city, residents cannot use these e-wallets to settle payments at retailers here due to the Mainland’s currency control. Non-Mainland account users of these mobile apps can settle payment at shops on the Mainland but they are not permitted to do so in other places; only Mainland account users can use Alipay and WeChat Pay to settle transactions in other countries and regions. 

“There are actually many benefits to setting up the mobile payment platforms besides boosting business. For example, retailers have no risk of receiving fake banknotes and they can save time lining up in banks to deposit money on a regular basis,” says Lei Cheok Kuan, chairperson of the Industry and Commerce Federation of Macau Central and Southern District 

To resolve this problem, Alipay and WeChat Pay have respectively launched a different version of digital wallets for consumers in Hong Kong, who can use Alipay HK and WeChat Pay HK in the Asian financial centre but not in other places. There is no equivalent version of Alipay and WeChat Pay in Macau – the city has its own mobile payment option, like MPay, the digital wallet of Macau Pass. 

“There are some opinions saying the introduction of [Mainland] payment platforms like Alipay is only beneficial to Mainland tourists,” says legislator Ho Ion Sang. “Given the still limited scope of Macau Pass [MPay], [the mobile payment tools available in Macau] cannot satiate the actual needs of residents.” 

Besides MPay, launched last year, UePay – a subsidiary of state-owned Guangdong Nanyue Group – is reportedly to debut its own digital wallet for Macau residents in the near future. Several local lenders have also launched mobile apps in recent years via which customers can settle payment for utilities and even pay in shops such as Tai Fung Pay of Tai Fung Bank. 

Privacy concerns 

Despite the endeavours of local mobile payment service providers and banks in recent years residents appear reluctant to go cashless at the moment, a survey shows. According to the annual research on the online behaviour of Macau residents, compiled by the Macau Association for Internet Research and eRS e-Research Lab, 55 per cent of 1,000 local adult interviewees this year said they have once used online payment, six percentage points higher than last year.  

“… the introduction of [Mainland] payment platforms like Alipay is only beneficial to Mainland tourists,” says legislator Ho Ion Sang. “Given the still limited scope of … [MPay, the mobile payment tools available in Macau] cannot satiate the actual needs of residents.” 

However, only 19 per cent of participants said they have used mobile payment apps in physical stores, while 78 per cent said they have never used them and 2 per cent did not comment. The survey additionally pointed out that 72 per cent knew about mobile payment but have never tried it. 

Over half said the local policy on mobile payment has to be further improved while 79 per cent were worried their personal data and bank information would be compromised when using mobile payment, it noted. But there was also a silver lining in the survey: about 64 per cent of interviewees said they are willing to try mobile payment in physical stores here like supermarkets, restaurants and shops in the future. 

“The government could encourage local financial institutions to further collaborate with nearby e-payment [service providers] to offer more advanced and diversified e-payment services in Macau, enriching the consumption experiences of both residents and tourists,” said Ho.  

“The penetration of mobile payment among individuals and merchants here is not as widespread as other regions,” he continued, naming Hong Kong, Taiwan, and Singapore. “Thus, the government should do more to promote the pros of mobile payment and encourage local financial institutions to come up with innovative services.” 

Mobile apps favoured by rich Chinese  

Mobile payment is not only popular among office workers and the growing middle class in Mainland China but also among wealthy individuals, a survey by the Hurun Research Institute shows. 

According to the Hurun Chinese Luxury Consumer Survey 2018, for the second consecutive year the most preferred payment system among China’s super rich was Alipay, a mobile payment arm of Chinese e-commerce giant Alibaba Group Holding. The second most preferred payment option was WeChat Pay, controlled by fellow Chinese technology giant Tencent Holdings. 

The result is in stark contrast to two years ago, when bankcards were ranked the most favourite payment channel among wealthy individuals. Bankcards tumbled to third on the list of preferred payment channels this year, the survey shows. The survey polled 463 Mainlanders worth over 10 million yuan (US$1.6 million) each, including 64 super rich individuals with a personal net worth of over 100 million yuan.  

Growing global reach of Mainland payment options 

Besides planting flags in Macau, the two Mainland Chinese mobile payment giants -Alipay and WeChat Pay – have expanded their footprints elsewhere in the world. 

Chinese state-run news agency Xinhua reported earlier this year that Tencent Holdings’ WeChat Pay is accepted in 20 countries and regions, including Japan and South Korea, while 38 countries and regions take Alibaba Group Holding’s Alipay. Additionally, consumers in 24 countries and regions can get tax refunds through Alipay, which offers various services in 60 overseas airports. 

Hong Kong, in particular, is a battleground for the two Mainland service providers, which account for about 93 per cent of the mobile payment market. Financial news agency Bloomberg reported this year that gaining a foothold in the Asian financial centre, which has a fully developed Western-style banking system, could pave the way for the success of Alipay and WeChat Pay in Europe and the United States by wooing consumers with the same winning formula.