'The Most Important Thing To Ever Happen In Fintech'

'The Most Important Thing To Ever Happen In Fintech'

over 4 years ago2 mins

Mentioned in story

This week, after the Chinese government relaxed regulations, Chinese tech giants Tencent and Alibaba announced they were opening their mobile payment systems to foreigners. It could forever change finance…

What does this mean?

Tencent’s WeChat Pay and Alibaba’s Alipay are incredibly popular in China: users pay at shops, restaurants, and even street food stalls simply by scanning a QR code. Those apps used to be off-limits to anyone outside the country, but not any more. Foreign cards can now be added to WeChat Pay – and while Alipay hasn’t gone that far yet, visitors can buy a 90-day prepaid “tour pass” card instead.

Percentage of people in each country who made a mobile payment
Percentage of people in each country who made a mobile payment

Why should I care?

This move will make life much easier for the 30 million tourists that visit China each year. Given that many places don’t accept credit cards, the only option before now has been to carry a wedge of cash. It should also help boost the $73 billion foreigners spend in China each year.

But it could also affect the world beyond China. WeChat and Alipay have both encouraged Western retailers to accept their payment methods, and those merchants – who want a share of Chinese tourists’ cash – are complying. Now that the apps are bringing on non-Chinese users, it’s possible Americans will eventually be able to buy things with them Stateside.

That would massively expand the Chinese firms’ potential market: if consumers use their apps for payments, they might also use their other services. And it’d be disastrous for Facebook, which is trying to create its own payment system. Apple and Alphabet, which are pushing their mobile payment systems, could also be hit.

We’re a long way from this actually happening: for now, foreigners can only use the apps on Chinese soil. But the potential for global dominance might be why investor David Galbraith called this “the most important thing to ever happen in fintech”. It’s a good job you can buy Alibaba and Tencent’s shares, then: see our Investing in China Pack to learn how.

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