The scale of mobile payments in China staggers the Western imagination.
In 2017, $15.4 trillion in mobile payments were processed, 54% by Alipay, and 39% by Tencent’s WeChat Pay. By the most generous estimation, the U.S. market, though growing steadily, processes a tiny fraction of that amount.
The payment solutions company SwiftPass, headquartered in Shenzen, China, is looking to change that with the humble QR code. When consumers think of mobile payments in the U.S., the NFC employed by Apple Pay and Google Pay gets more attention, but it is the QR code that has had greater success, employed by Starbucks, and many independent coffee shops and quick-service restaurants using private-label solutions.
“Our customers are the banks,” Tong Liu, international business development director at SwiftPass, told Bank Innovation. He noted that the company typically grows in new markets by working with acquiring institutions, and getting merchants to adopt the technology first.
The service, now available in more than 40 markets including the U.S. and Canada, began in China and formed early partnerships on the acquiring side with Ant Financial and Tencent, which together operate the country’s dominant and ubiquitous payment platforms, said CEO Daniel Xian.
SwiftPass settled on QR codes because of their cost-effectiveness and ease of use for merchants. SwiftPass gives a QR code to the merchant to acquire payments, and that code can be displayed a number of ways. “You don’t even need a smartphone,” said Liu. “A merchant can set up a card with a QR code by the register.”
But the company is not only about QR codes. It offers a full stack of payments solutions, including provisioning virtual credit cards, cryptocurrency payments, and cross-border payments. It can also help merchants with marketing campaigns, gift cards, and loyalty programs.
“Mobile payments advanced quickly in China because of the lack of development of credit cards,” Liu said. “Merchants can adopt mobile payments at low cost, and it is more efficient for them.” Liu pointed out that merchants using mobile payments enjoyed lower MDR (merchant discount rate) or interchange fees than standard card use, as well as essentially universal acceptance, always key for merchants.
Another advantage of mobile payments is additional data to merchants, Liu said, and this may be important for establishing mobile payments in the U.S. via loyalty and rewards “Mobile allows more communication between merchant and user,” he said. “The user makes a purchase, and the merchant can make an additional offer.”
In its many markets, SwiftPass’s business development team helped banks acquire the merchants, Liu said.
“The history of SwiftPass is the history of mobile payments in China,” CEO Daniel Xian said. The company grew to its present 40-plus markets helping spread WeChat and Alipay.
The U.S. may not enjoy the same objective conditions as China, but Xian still sees success for mobile payments in the U.S. “It takes time and needs time to develop the habit. Getting merchant scale is easy, but scaling users is different.”
Though banks are often criticized for letting opportunities pass them by, Xian said banks in both China and world widely were not asleep while payments grew beside them and always seeking opportunities to provide better and comprehensive services to their clients. “Banks might have developed their own payments & systems,” he said, “but in the past, they hardly compete with Tencent & Alipay and other global fintech giants, etc.” Tencent won because it has over 1 billion social media users, and people open their app dozens of times a day. ” In the competition between Tencent and Alibaba, Alibaba needed to spend lots of money on the consumer side to educate the user.”
In the U.S. he said, it will be similar. “The market is still waiting for a serious player, or by a combination of bank and fintech company, to burn money to earn market share.”