Mobile payment platform ‘will go far’ to lift consumption
China has established its first national mobile payment platform using near field communication technology as part of an effort to boost information consumption, a senior central bank official said.
People’s Bank of China Deputy Governor Li Dongrong said in an interview on Monday that the platform, which enables communication among mobile payment providers such as financial institutions and mobile network operators, began trial operations at the end of last year.
The platform has already been connected to the mobile payment branches of seven organizations, including China Construction Bank Corp, China CITIC Bank Corp Ltd, China Everbright Bank Co Ltd, China UnionPay and leading telecom operator China Mobile Communications Corp.
The platform “provides a solid infrastructure foundation to help China boost domestic information consumption and make the sector a new driver for economic growth”, Li said.
He said that mobile finance has entered an era of “standardization”, so it’s important to provide an integrated ecosystem with unified standards to help mobile payment providers cooperate.
Colin Light, China Digital Consulting Leader for PricewaterhouseCoopers in Hong Kong, said that very few countries in the world have successfully built a single platform that links financial institutions and mobile network operators.
“The biggest obstacle for banks and mobile operators to operate in a unified way is to build scale. You need a scale advantage to reach wide acceptance of payments,” said Light.
Despite the obstacles, Light said that near field communication-based mobile payments have a very promising future. The technology has the potential to replace cash, credit cards and debit cards.
NFC-based proximity mobile payment facilities allow users to make payments quickly and conveniently by tapping their phone on any NFC-enabled terminal at checkout
But proximity mobile payments accounted for just 0.8 percent of the third-payment mobile market in China in 2013 due to the scarcity of terminal devices, said consultancy iResearch Group.
Transactions in China using third-party mobile payments surged 707 percent year-on-year to 1.2 trillion yuan ($$197 billion) in 2013.
Although the PBOC has given strong support to develop NFC-based proximity mobile payments, Wang Weidong, an analyst with iResearch Group, said there are many hoops to jump through before the technology can compete with the popular Internet-based mobile payment system, Alipay.
“First, there are not many NFC-enabled smartphones in China. To promote proximity payment, you need people to buy mobile devices that are tailor-made to use this technology.
“Second, how do you educate and nurture a group of people who are comfortable using proximity payments? That’s also important because it is very difficult to change the habit of users,” Wang said.