Digitalisation in China: Trends and Technology for 2017
With the dominance of industry giants AliPay and WePay, 2016 was the year of mobile payments in China. We start 2017 by examining trends and technology shaping the sector for the next 12 months. Internet of Things (IoT), digital‐only banks and consumer enthusiasm for technology will drive activities, while enhanced security must also be addressed.
China is the world’s largest exporter and it sets global trends both in technology and in its adoption. For 2017, there should be continued growth in digitalisation. Analysts point to the upward trend of smartphone ownership among Chinese millennials. Strategy Analytics, a research company, says that of more than 950 million smartphones in use in China, around 100 million are in the hands of millenials, a number set to rise. Those born post‐1990, known in China as the “jiu ling hou”, have grown up with networks such as WeChat influencing social behavior. In particular, the prolific use of QR codes drives mobile payments, with 195 million transactions in 2016 according to eMarketer. This machine‐readable code is an inexpensive method of exchanging large amounts of data, including payment information. Their influence shapes merchant behavior.
… of 950 million smartphones in use in China, 100 million are in the hands of millennials, a number set to rise
Additionally, research in China shows 58.85 million POS terminals will join China’s UnionPay network by 2020, a CAGR (compound annual growth rate) of 20.9% from 2015 to 2020. The increase in smartphones along with wider accessibility of POS technology means we can expect a spike in mobil‐ payment activity outside of large cities and urban centers in 2017. A further factor lies in research from Mintel on Chinese consumer trends for 2017. It describes expectations of efficiency, coupled with a rising approval of technology. This feeds the expansion of IoT, with TalkingData approximating 1.33 billion devices in China, the majority in the hands of those under 36 years of age. This will accelerate in 2017 with the roll‐out of low‐cost IoT data networks. Such cost efficiencies will spur development and boost China’s burgeoning Smart City framework.
The future of banking is in China
On the finance side, a 2016 Wall Street Journal headline declared, “The Future of Banking is in China.” This is exemplified by strong government initiatives and private sector determination. For example, the People’s Bank of China (PBOC) has started recruitment in blockchain and big data. The ambitious drive is to build a digital currency backed by central government, a legal tender with both digital and paper currency in circulation. Moving online reduces costs, increases transparency and limits fraudulent activities. However, the date for any launch has not yet been made clear. In the meantime, the giants of mobile payments have set their sights on digital banks. Ant Financial launched online‐only MyBank in 2016, issuing 870,000 loans thus far. TenCent‐backed WeBank boasts of a one‐minute client on‐boarding process, linked to the account holder’s mobile phone number. Hungry for a solution that matches their online practices, there should be strong consumer‐led growth in 2017.
58.85 million POS terminals will join China’s UnionPay network by 2020
Regulators try to keep up
As technology lurches forward, regulators scramble to keep up. The PBOC is moving to secure mobile payments via strengthened regulation. For example, third‐party online payment providers such as WeChat now require Chinese bank cards to verify “real‐name” accounts. This is to be matched by real‐name registration for all SIM cards by the end of June 2017. However, current methods of purchasing SIMs can be opaque, which creates difficulties for enforcement. China’s contentious Cyber Security Law will also be enacted this year. It imposes aspects of security management upon IoT manufacturers, firmware administrators and application software download service providers. The response from the China mobile industry is moving towards biometric security, such as in the latest Huawei flagship smartphone, which has a fingerprint sensor.
Security concerns, the impact of learned social behaviors and home‐grown technology advancements are vital. So many changes to the Chinese market are bringing further opportunities. As a long‐term partner, G+D Mobile Security is well positioned. 2017 may prove to be a breakaway year.