今涛拍案 2 Months 0
In the early period (that is, from the end of the 1990s to around 2012-13), the main reason why credit cards were not popular in China was due to the slow promotion of credit cards. Especially in the early period, coupled with the relatively late development of China, there was little concept of advanced consumption.
In the past five years, credit card is still a niche payment method in China. Now, credit card has been surpassed by the next-generation payment platform, which is a world with customers as the core and modern digital and mobile as the center. In contrast, the core of today's credit card payment infrastructure is still the technology that can be traced back to 30 or even 50 years ago.
An interesting assumption worth thinking about is what will happen if the use of credit cards surges across China before the rise of smart phones. If there is already a "good enough" payment solution dominated by two or three players, will the next generation payment solution develop so quickly?
Let's first consider this issue from the perspective of the main components of the credit card ecosystem to understand why consumers in the market adopt credit cards so slowly, especially in the early stage.
In the credit card ecosystem, there are:
3. Credit card issuer - the person bearing credit risk, usually a bank, such as JPMorgan Chase, Wells Fargo Bank or Bank of China
4. Transaction network - person who facilitates transactions between merchants and buyers, such as Visa, MasterCard or China UnionPay
Now let's go back to the late 1990s. After about 20 years of rapid development, China's consumer economy has just reached the level where some consumers began to think about the world beyond cash. Ten years ago, China was a 100% cash based economy, and the way of payment seemed almost the same as in the past 1000 years. If you pull a person out of China in the Tang Dynasty in the 9th century, put him in a wet goods market in about 2009, and then give him a cash, buying and consumption is not a problem for him at all.
The only businesses that may accept credit cards are those that cater to foreigners; Places like five-star hotels and airports. For the other 99% of Chinese businessmen, implementing the credit card system requires considerable investment in credit card processing terminals and secure data communication lines... In return for your investment, you are lucky to hand over 2-3% of each transaction to the American payment company. "No, thank you. Let's use cash," almost every Chinese businessman replied.
Now, from the perspective of consumers, credit cards are only useful where you can actually use them. Otherwise, they are just a debt made of plastic, occupying precious space in your wallet. As few businesses accept credit cards, Chinese consumers have little demand for credit cards. This is a typical chicken/egg problem.
In the early days, Chinese consumers basically had no recorded credit records. All banks - usually acting as credit card issuers - were owned/controlled by the state, and there was no incentive to sell credit cards to consumers; This was largely true even after China established China UnionPay in 2002 to provide a local alternative to the global and mainly US led trading network. The promotion of credit cards is painfully slow. More than a decade later, less than 10% of the population use credit cards, while almost everyone in the United States has one.
Of course, the slow spread of credit cards is not unique to China. In fact, if you study the development of credit card networks in the United States and Europe, you will find that it took decades for these markets to fully develop.
Even in 2013, China is still a cash based society to a large extent. It is rare to find credit card payment terminals outside the places frequented by tourists and foreigners. However, some major events have occurred one after another. In essence, these events have promoted the rapid rise of China's next-generation payment ecosystem:
(1) Alibaba developed the next generation e-commerce payment platform in 2004
Alipay is a third-party payment platform launched by Alibaba in 2004 to promote e-commerce transactions on taobao.com. In the early period, it was very similar to eBay. At the beginning of the period, it accounted for a small proportion of the entire trading market like eBay, because it was mainly limited to small (but rapidly growing) e-commerce markets. It has been living in a relatively niche market
(2) In less than four years, the use rate of smart phones has gone from "0 to 60%" (2010-2014)
This is the key factor for the next-generation payment platform to stand firm, because it eliminates one of the main areas of friction in credit card applications - persuading businesses to invest in expensive credit card processing technologies. The processing capacity of smart phones weakens the processing capacity of typical credit card processing terminals. This is not surprising, as the core credit card processing technology is still based on the infrastructure of the 1980s.
The technology behind Alipay's QR code based payment system is superior to the back-end credit card processing technology, just as Apple's IOS is superior to Symbian and blackberry, whose core core core was developed before the era of data-centric wireless network.
The widespread existence of smart phones eliminates the need for expensive and cumbersome proprietary credit card payment terminals. Instead, buyers of all sizes can now use their smartphones as a flexible payment terminal - they don't even need to install additional devices/dongles (such as Square) to accept payments. Consumers do not need to wait for plastic credit cards to appear in the mail and be "verified" - they already have a more complex and secure platform in their pockets or wallets. Soon, Alipay refocused its platform on mobile users... The usage rate soared.
Ironically, this has led to a surge in the installation of payment terminals and digital point of sale (POS) systems across the country, but the focus of these systems is to read the QR code system used by Alipay and wechat payment, not credit cards. For most businesses without credit card terminals before, this is a huge progress. It is not only convenient for payment, but also conducive to general accounting calculation and shrinkage control.
(3) Entering the social circle (2014): WeChat entered the competition with digital red envelope
At the beginning of 2014, WeChat, China's largest social platform, launched a new function at the beginning of the Lunar New Year. By linking its (then) relatively small WeChat payment platform with its social/SMS platform, users can remit money to each other in the form of a digital red envelope. At that time, the social/SMS board was already the most widely used application on almost every Chinese smartphone. This is a sensation overnight; Within one month, the use of wallets increased from 30 million to 100 million. Today, WeChat payment supports more than 1 billion active users.
China's mobile centric digital payment infrastructure has surpassed the relatively old credit card payment infrastructure that dominates most developed countries. All this happened in the blink of an eye - I wrote an article about an eye opening experience. After two years of interruption without visiting China, I felt like a digital novice.
In addition, China's next-generation mobile centric digital payment infrastructure accelerates the adoption of offline to online (O2O) services in China by making the payment process relatively cheap and less friction. For example, in China, the huge growth of bike sharing is partly due to the ability to conduct payment transactions as low as 1 yuan (15 cents).
The current credit card economic situation - given the dual/oligopoly nature of today's global trading network, my view is unlikely to change - makes it difficult to conduct transactions below a certain value, mainly because the effective profit percentage of intermediaries is low:
With its excellent technology, and more importantly, Alipay and wechat payment have firmly established the de facto payment mode in China. At present, the traditional credit card infrastructure really has no chance to enter China on a large scale. The platform built for the modern mobile and digital center world is perfect enough, and consumers do not need to go back to the backward underlying technology to ask for trouble.
Americans usually think that credit cards are common all over the world. In fact, many stores in Hong Kong do not accept credit cards, and many stores only accept credit cards when the bill amount exceeds a large amount. This makes credit cards of little use. A considerable number of people in Hong Kong do not have credit cards. The popular electronic payment method here is Octopus card, which was originally used for taking subway and bus. It is a small currency card, and is widely accepted and used.
I think credit cards are not very popular in poorer countries than China, which means that most people in the world do not have credit cards.
About 20 years ago, when the mobile phone revolution began, many Chinese families still did not have landlines. Then, China basically skipped this stage and accepted mobile phones faster than many western countries. This phenomenon is more evident in poorer countries. Huawei made a fortune selling mobile network facilities in Asian and African countries.
The same is true of payments. The Chinese are not rich enough to accept credit cards widely. Before credit cards became big enough, new technologies had been introduced. Alibaba developed more convenient Internet payment to promote its online commerce. Subsequently, Tencent launched their Internet payment to facilitate many daily activities in their WeChat applications. It's too late for credit cards.
By the way, China believes that it is unhealthy for two private companies to dominate online banking. It is trying to establish an Internet banking infrastructure - UnionPay, which is fair to all competitors. The government regards the project as an infrastructure comparable to roads, railways and electricity.
After investigation, I won't say that credit cards are not popular in China.
By 2016, the number of active credit cards in China is 465 million, or 340000 per million people (taking into account the population of China is 1.35 billion).
I didn't find the data of the United States, but I searched the UK FCA credit card report released in July 2016 on Google（ https://www.fca.org.uk/publication/market-studies/ms14-6-3-credit-card-market-study-final-findings-report.pdf ). From the following statement:
1.30 We found that about 6.9% of the cardholders (about 2 million) defaulted or defaulted in 2014... 8.9% of the active credit cards (5.1 million accounts) in January 2015 will default.
I speculate that there are 57 million credit cards in the UK (8.9% of 57 million is 5.1 million), or 877000 cards per million people (the UK population is 65 million).
To be sure, in terms of per capita credit cards, Chinese people have far fewer credit cards than British people. But please remember that the UK is very mature in finance and has a longer history in developing the credit card market. In addition, the British are much richer than the Chinese. China's credit card market has just developed for 15 years, and the market is still growing.
In China, credit cards are paid through UnionPay in most cases. The following are the data reported by Nelson in 2016. You can find the position of UnionPay:
(Please note that the data is credit card plus debit card transactions. Source: card and mobile payment industry statistics)
I just searched Google for 15 minutes, and found no direct evidence that credit cards are not popular in China.