Why China Is a Good Opportunity for the Mobile Payment Market

Why China Is a Good Opportunity for the Mobile Payment Market


May. 4 2021, Updated 10:15 a.m. ET

Mobile payment services are fueling growth in China’s e-commerce market

According to a report released from the China (MCHI) CECRC (E-Commerce Research Center) on April 8, 2015, the country’s e-commerce market grew to $2.2 trillion, or ~13.4 trillion yuan, in 2014—an increase of 31.4% on a YoY (year-over-year) basis.

Mo Daiqing, an analyst, as stated by the International Business Times, accredits the increase in the mobile payment services as a constituent that enabled growth in China’s (FXI) e-commerce space.

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According to a new report by eMarketer, titled “China Mobile Payments: Dueling Technologies, Gigantic Opportunities,” e-commerce players—like Alibaba (BABA) and Tencent—are responsible for the majority of the activity and innovation surrounding the mobile payments system in China.

To gain diversified exposure to software and IT services, you can invest in the iShares US Technology ETF (IYW). It invests about 48.21% of its holdings in this market. According to eMarketer, as the above chart shows, mobile payment transactions in China have more than doubled in the past year—from $1.6 billion in 2013 to $3.5 billion in 2014.

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China’s mobile commerce market

According to iResearch Consulting Group, as the above chart shows, third-party mobile payment services in China registered a total transaction volume of 1.22 trillion renminbi, or ~$197 billion, in 2013—an increase of 707% on a YoY basis. The majority of this growth is due to the ease with which leading e-commerce players—Alibaba’s Alipay, Tencent’s Tenpay, and UnionPay’s Lakala—provided an array of payment options through smartphones.

Consumers’ increased preference to shop online through mobile devices also contributed to this growth. Realizing the innovative ways e-commerce players in China are employing to drive mobile commerce to their platforms, Apple (AAPL) and UnionPay announced their partnership in September 2014. The partnership will include a mobile payment service to bring UnionPay’s app to iPhones all across the country.

Globally, eBay (EBAY) is an established player in this market. Apple and Google (GOOG) are relatively new players in this space. China is a huge market for tech companies especially Apple. However, increased regulations by China has urged tech companies to look for partnerships with native companies to strengthen and enhance their presence in the country.

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