· November 26, 2018

One of the common “China is ahead of the rest of the world” stats is the percentage of mobile payments in China versus everywhere else. Like much about the PRC, assuming that signals a future direction of mobile payments in the rest-of-the-world is oversimplified. Doesn’t mean that it’s s wrong, but getting the story right is important if you want to think about the diffusion of other technologies. 

One of the core factors in mobile payments in China is the absence of an effective credit card system. In the US, and then much of the rest of the world, the credit card provided the income necessary to generate the infrastructure required to accept non-cash payments broadly. Credit cards combined two features - easy access to a short term line of credit, and an alternative to cash and cheque based payment. 

The two are not in any way tied - Debit cards have been the dominant form of “credit card” transaction in many areas, using the established infrastructure. Similarly, Hong Kong and Japan both have their stored-value transit cards used broadly for smaller non-cash payments.

The PRC had a complete lack of a broad based credit system, which made the credit part of the credit card a non-starter, and the timing of the development of the credit card infrastructure versus the open and reform moment limited the opportunities for that to spread. WeChat and AliPay offered the first viable alternatives to cash payments. 

There are some great takeaways from their rise - like the clever vitality of the red envelopes idea WeChat used to launch their payments - but a lot of traps too. 

Apple/Google/Samsung Pay are primarily vehicles for other payment schemes, and end up being UX improvements rather than anything fundamentally different. The marginal value of contactless with your phone versus contactless with a card feels slight, but the fact that debit card usage is dropping in favour of mobile in the US may indicate that consumers are more comfortable tapping their phone than a card. It’d be interesting to see what the effect is in markets where contactless was already popular, like the UK. 

This kind of mismapping contexts can leave you vulnerable to interpreting technologies developed in the context of the PRC under the norms of the rest of the world, specifically the US. Things like the social credit system look incredibly Orwellian, until you factor in just the existing level of Orwellian that is the current US credit scoring system, and postulate a world where none of what it does is being done (good or bad). 

It’s true that the future is here, somewhere, but its easy to misestimate in what dimensions it is unevenly distributed.