GLOBAL REACH

China’s Alipay will soon be about as widely accepted as Apple Pay in the US

Obsession
China's Transition
Obsession
China's Transition

Many consumers in China are accustomed to shopping without cash, thanks to the increasingly wide acceptance among merchants of tap-and-go payment systems based on smartphone apps. Such convenience often disappears, however, when they travel to other countries.

That will soon be less of a problem for them in the US. Alipay, China’s mobile-payments king, announced a deal on May 8 with Atlanta-based payments processor First Data under which more than 4 million US merchants will accept payment via the service. That puts it in the same league as Apple Pay, which is at 4.5 million. But for the company behind Alipay, Ant Financial (part of the e-commerce giant Alibaba), the primary target is not Americans. It’s the growing number of Chinese tourists and students in the US.

Last year Chinese travelers spent over $260 billion while abroad, making China the largest outbound market, according to the UN World Tourism Organization. The country has shown double-digit growth in tourism expenditure every year since 2004.

The US received some 2.6 million Chinese visitors in 2015 (pdf, p. 2), according to National Travel and Tourism Office. The number is expected to reach 6 million by 2021 (pdf), according to the US Travel Association.

Alipay’s main competitor in China is also targeting Chinese consumers in the US. WeChat Pay, from the internet giant Tencent, is integrated inside the social platform WeChat, which had nearly 900 million users at the end of last year.

Together, the rivals make up over 90% of the third-party mobile-payments market in China. The value of such payments in China more than tripled last year, reaching about $5.5 trillion, dwarfing the equivalent number in the US.

Citcon, a Chinese-funded Silicon Valley payments startup, in February partnered with both services to bring them to merchants in North America. Alipay’s deal with First Data, however, is much larger, leaving Tencent to play catchup in the US with its chief rival.

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