China’s mobile payments volume could exceed global credit card volume in 2018

Digital payments in China are processed by scanning QR codes at the point of sales which link to the customer’s bank account in China.

China’s mobile payments were 58.8 trillion yuan in 2016.

Xinhua News reported that consumers in China’s third-party mobile payment market spent a total of $3.46 trillion (23 trillion yuan) in mobile transactions during the second quarter of 2017 alone. This represents a 22.5% increase from the first quarter of this year.

In 2017, Alibaba and Tencent have 92.8% of the mobile payment market: 53.7% of China’s mobile payment service customers use Alibaba’s Alipay, and 39.1% use Tencent Finance.

China is leapfrogging over credit card usage. The centralized and vertically integrated Alibaba and Tencent have enabled the rapid expansion of mobile payments in China.

China’s Mobile phone payments

2015 2.2 trillion yuan
2016 58.8 trillion yuan (US$9 trillion)
2017f 98.7 trillion yuan ($15.5 trillion)
2018f 165.9 trillion yuan ($26.3 trillion)

according to iResearch Consulting Group in China.

That is more than 90 times the size of the U.S. mobile payments market, according to Forrester Research.

Credit, debit and prepaid card transactions for six major card networks shot up a combined 13.3% from 2015 to 2016, and purchase volume rose 5.8% to $20.606 trillion, according to new global data from card and payment industry publisher The Nilson Report.

Nilson reported that Visa, Mastercard, Diners Club/Discover, American Express, China’s UnionPay and Japan’s JCB cards had 257.17 billion purchase transactions in 2016, This was about 12% (30.21 billion) more than in 2015.

U.S. noncash payments, including debit card, credit card, ACH, and check payments, are estimated to have totaled over 144 billion with a value of almost $178 trillion in 2015, up almost 21 billion payments or about $17 trillion since 2012.

ACH is dominant in the US for automated payments and payroll deposits

Automated Clearing House (ACH) is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit, payroll and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills. Debit transfers also include new applications such as the point-of-purchase (POP) check conversion pilot program sponsored by the National Automated Clearing House Association (NACHA). Both the government and the commercial sectors use ACH payments. Businesses increasingly use ACH online to have customers pay, rather than via credit or debit cards.

In the USA, cash usage fell from representing 40 percent of transactions in 2012 to 32 percent in 2015 according to the Federal Reserve.

Japan is protecting its banking industry and will give the Japanese banks time to create success QR code mobile payment solutions.

Thailand, Singapore, India, Hong Kong and the Philippines are allowing the Chinese mobile payment giants into their markets.