Matthew Crabbe
Matthew is Mintel Trends Regional Director, Asia-Pacific. He and his team provide insights and analysis on the latest market developments and consumer trends across the region.

Alibaba’s Jack Ma dropped in an introduction to his latest new toy at the end of his speech to the CeBit conference in Hanover this week – a pay-with-your-face app that allows for mobile online purchasing using facial recognition technology. The app is being developed by Ant Financial (the Alibaba affiliate company that runs the Alipay online payment service, and which has been mooted as going public in a couple of years). In the demonstration, Ma used his phone to take a selfie which automatically authorised a purchase, from the Alibaba site, of a commemorative stamp for Hanover’s 1948 trade fair, as a gift to the city’s mayor. Ma stated that this new technology will be “the future [of how] people will buy things online”.

But that was it. No further information about the obvious questions regarding security were forthcoming, but if this product does come to market (and we expect it will, given Ma’s personal public introduction) this will have significant implications for the mobile online retail payments market, not just in China (where it will be launched first), but for the entire global online retail industry.

China’s e-payments market

According to Mintel’s Payment Preferences China 2014 report, the mobile online payments market is small but booming. By the end of June 2014, China had in circulation 4.5 billion bank cards (3.35 cards per person), but only 422 million were credit cards, at still a relatively low 0.31 credit cards per person. Yet bank card transaction number and value grew by 54.37% and 35.26% year on year by the end of June 2014.

The number of bank cards being issued, and the spending on those cards, is still surpassing growth in electronic third-party payments, which indicates both that there is still strong growth potential for third-party electronic payment service providers.

Online shopping, and therefore payments, has been growing very rapidly in the past few years. By the end of 2013, China’s online shopping population reached 302 million, having nearly trebled in five years. Yet, per capita, spending is growing even faster, with total business-to-consumer (B2C) online retail sales having grown more than 40 times in value between 2009 and the end of 2014.

Within B2C, mobile online retail emerged from virtually nothing in 2010, to 32% of the market by the end of 2014. In 2013, the People’s Bank of China handled 1.67 billion mobile payment transactions (up 213% versus 2012) worth RMB 9.64 trillion (up 317% versus 2012). In the first three months of 2014, mobile payments had already exceeded half of the 2013 total.

Persuading the shopkeepers and the shoppers

But there is still resistance to change. Many retailers have been slow to adopt, for example, hear-field communication payment systems, and remain reticent to foot the cost of switching away from magnet card strip reading scanners to use smartphone scan technology. Payment service providers, such as Alipay, need to do more to persuade retailers to adopt the new technologies, by incentivising them.

Such technologies will only be adopted, large scale, by consumers when they reach critical mass. Retailers will only be incentivised, themselves, if they see enough consumers demanding these new technologies. The payment providers, such as Alipay, need to bring the shopkeepers and shoppers together on this, if it is to gain traction.

If anyone can do that, it is likely to be Alipay. Alipay held an estimated 45% of the online retail market transactions market by the end of June 2014. According to Mintel’s Online Retailing China 2014 report, Alibaba itself dominates the e-commerce market in China with a 71.1% share of the market

But mobile payments are still not universally accepted. Only half of the online population across tier one to three cities have used mobile payments over the past six months, despite a 96% usage rate of online payment and 95% ownership of smartphones (according to Mintel’s Mobile Phones and Apps China 2014 report), only 22% of mobile payment non-users say they would like to use mobile payment more often in the future.

This indicates that people remain conservative about adopting new payment methods, although 42% of people surveyed say they are interested in trying more advanced payment authentication methods, which displays a curiosity in how such systems can benefit them.

Most consumers are convinced of the convenience, with 67% of consumers surveyed by Mintel feeling mobile online payment processes are convenient, and 63% feel they can pay anytime/anywhere. But concerns over security persist, with 37% feeling insecure about binding banking information to mobile apps and 34% were uncomfortable about the amount of data that is being collected about their spending habits.

Is this the future?

The new pay-with-your-face systems are certainly look impressive. The idea of paying for products and services so simply, without having to queue, sounds appealing. And, we are convinced it will be introduced to the market eventually. But bringing this technology to the market successfully will require a lot of work persuading both retailers and consumers of the benefits. Also, we will need to hear a lot more from Mr. Ma about the security guarantees!

Mintel’s Director of Research for Asia-Pacific, Matthew looks at the development of China’s consumer lifestyles and the impact on Chinese people and society. Having previously co-founded research company Access Asia, Matthew has worked exhaustively on trying to make sense of the myriad of contradictions in China’s economics and statistics on consumer markets across China.