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China’s Digital Wallets Offer a Glimpse at the Future of Payments

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Chinese consumers conduct 11 times more mobile payments than their counterparts in the United States, so as we look to the future of digital wallets, China is a natural place to start.

Mobile Payments USA vs. China

Forecasts for mobile payment adoption in the United States remain flat for now; however, two major brands – WeChat and AliPay – offer a glimpse of what the future may eventually hold for mobile payments in North America.

Digging Through WeChat’s Wallet

WeChat, a platform owned by Tencent, is a force to be reckoned with. It’s fast closing in on one billion monthly active users (MAUs), and the average user spends over an hour on the app each day.

WeChat users aren’t just unusually chatty – there’s actually a high level of utility to the platform that North American apps have yet to match. WeChat’s wallet alone is packed with features ranging from mobile payments to ride hailing. Below is a look at just some of the features.

WeChat Overview

WeChat’s wallet is packed with features that are constantly evolving, but here are some current features worth noting:

Payments in the real world
“Scan-and-pay” is widely popular in China, particularly in big cities where it’s hard to find a product or a service that cannot be purchased with a mobile device. According to China Channel, over 90% of Chinese consumers have adopted WeChat as a method of payment in offline purchases. That compares with a 32% adoption rate for debit and credit cards.

Red Packets
WeChat has seen tremendous growth of its wallet by capitalizing on China’s tradition of gifting cash-filled red envelopes (known as hongbao). In fact, the volume of digital red packets sent has skyrocketed from 16 million to 14.2 billion in only three years.

Digital red packets

Digital Tip Jar
WeChat also offers a glimpse at a new avenue for content creators to monetize their hard work online. WeChat’s Tip Jar feature allows users to send micro-payments to writers, musicians, artists, and more.

Go Dutch
Splitting the bill in a busy restaurant or pub setting can be major hassle. “Go Dutch” is a feature that allows WeChat users to divvy up a bill and pay using the app. Features like Go Dutch make digital payments an appealing option because they solve a real world problem.

Third-Party Apps
WeChat has robust third-party integration within its wallet. Functionality is so deep that users can order anything from transportation to home cleaning services with the push of a button. China’s largest e-commerce, group buy, and ride hailing companies are already on these platforms, but Western brands like Starbucks are getting in on the action too.

Going Head-To-Head

The mobile payments sector is becoming increasingly binary as WeChat and AliPay dogfight for market share. AliPay – Ant Financial’s payment brand – was once the undisputed leader in mobile payments, but the company has recently seen its market share eroded by an increasingly scrappy WeChat. WeChat has smartly leveraged its popularity and massive user base to get people using it as a payment tool as well.

Market share of digital wallets

ApplePay, which had high hopes for the Chinese market, continues to lag far behind domestic brands.

Growing Pains for Digital Wallets

China’s central bank recently imposed tougher rules regarding scan-and-go payments, a move that Ant Financial and Tencent are publicly praising, but that may dampen the meteoric growth trajectory of mobile payments. The new regulations take aim at aggressive tactics used to capture market share from competitors, and set limits on how much consumers can spend daily using barcode-based payments.

Despite growing pains, mobile payments and digital wallets will continue to be a dominant part of the Chinese economy. The only question is, when will the rest of the world follow suit?

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China

COVID-19 Crash: How China’s Economy May Offer a Glimpse of the Future

China has seen a severe economic impact from COVID-19, and it may be a preview of what’s to come for countries in the early stages of the outbreak.

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COVID-19 economic impact

The Economic Impact of COVID-19

China, once the epicenter of the COVID-19 pandemic, appears to be turning a corner. As the number of reported local transmission cases hovers near zero, daily life is slowly returning to normal. However, economic data from the first two months of the year shows the damage done to the country’s finances.

Today’s visualization outlines the sharp losses China’s economy has experienced, and how this may foreshadow what’s to come for countries currently in the early stages of the outbreak.

A Historic Slump

The results are in: China’s business activity slowed considerably as COVID-19 spread.

Economic IndicatorYear-over-year Change (Jan-Feb 2020)
Investment in Fixed Assets*-24.5%
Retail Sales-20.5%
Value of Exports-15.9%
Industrial Production-13.5%
Services Production-13.0%

*Excluding rural household investment

As factories and shops reopen, China seems to be over the initial supply side shock caused by the lockdown. However, the country now faces a double-headed demand shock:

  • Domestic demand is slow to gain traction due to psychological scars, bankruptcies, and job losses. In a survey conducted by a Beijing financial firm, almost 65% of respondents plan to “restrain” their spending habits after the virus.
  • Overseas demand is suffering as more countries face outbreaks. Many stores are closing up shop and/or cancelling orders, leading to an oversupply of goods.

With a fast recovery seeming highly unlikely, many economists expect China’s GDP to shrink in the first quarter of 2020—the country’s first decline since 1976.

Danger on the Horizon

Are other countries destined to follow the same path? Based on preliminary economic data, it would appear so.

The U.S.
About half the U.S. population is on stay-at-home orders, severely restricting economic activity and forcing widespread layoffs. In the week ending March 21, total unemployment insurance claims rose to almost 3.3 million—their highest level in recorded history. For context, weekly claims reached a high of 665,000 during the global financial crisis.

“…The economy has just fallen over the cliff and is turning down into a recession.”

Chris Rupkey, Chief Economist at MUFG in New York

In addition, manufacturing activity in eastern Pennsylvania, southern New Jersey, and Delaware dropped to its lowest level since July 2012.

Globally
Other countries are also feeling the economic impact of COVID-19. For example, global online bookings for seated diners have declined by 100% year-over-year. In Canada, nearly one million people have applied for unemployment benefits.

Hard-hit countries such as Italy and Spain, which already suffer from high unemployment, are also expecting to see economic blows. However, it’s too soon to gauge the extent of the damage.

Light at the End of the Tunnel

Given the near-shutdown of many economies, the IMF is forecasting a global recession in 2020. Separately, the UN estimates COVID-19 could cause up to a $2 trillion shortfall in global income.

On the bright side, some analysts are forecasting a recovery as early as the third quarter of 2020. A variety of factors, such as government stimulus, consumer confidence, and the number of COVID-19 cases, will play into this timeline.

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The Emissions Impact of Coronavirus Lockdowns, As Shown by Satellites

While the COVID-19 pandemic has been all-consuming, these satellite images show its unintended environmental impacts on NO₂ emissions.

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The Emissions Impact of Coronavirus Lockdowns

There’s a high chance you’re reading this while practicing social distancing, or while your corner of the world is under some type of advised or enforced lockdown.

While these are necessary measures to contain the spread of the COVID-19 pandemic, such economic interruption is unprecedented in many ways—resulting in some surprising side effects.

The Evidence is in NO₂ Emissions

Nitrogen dioxide (NO₂) emissions, a major air pollutant, are closely linked to factory output and vehicles operating on the road.

As both industry and transport come to a halt during this pandemic, NO₂ emissions can be a good indicator of global economic activity—and the changes are visible from space.

These images from the Centre for Research on Energy and Clean Air (CREA), as well as satellite footage from NASA and the European Space Agency (ESA), show a drastic decline in NO₂ emissions over recent months, particularly across Italy and China.

NO₂ Emissions Across Italy

In Italy, the number of active COVID-19 cases has surpassed China (including the death toll). Amid emergency actions to lock down the entire nation, everything from schools and shops, to restaurants and even some churches, are closed.

Italy is also an industrial hub, with the sector accounting for nearly 24% of GDP. With many Italians urged to work from home if possible, visible economic activity has dropped considerably.

This 10-day moving average animation (from January 1st—March 11th, 2020) of nitrogen dioxide emissions across Europe clearly demonstrates how the drop in Italy’s economic activity has impacted the environment.


Source: European Space Agency (ESA)

That’s not all: a drop in boat traffic also means that Venice’s canals are clear for the time being, as small fish have begun inhabiting the waterways again. Experts are cautious to note that this does not necessarily mean the water quality is better.

NO₂ Emissions Across China

The emissions changes above China are possibly even more obvious to the eye. China is the world’s most important manufacturing hub and a significant contributor to greenhouse gases globally. But in the month following Lunar New Year (a week-long festival in early February), satellite imagery painted a different picture.

no2 emissions wuhan china
Source: NASA Earth Observatory

NO₂ emissions around the Hubei province, the original epicenter of the virus, steeply dropped as factories were forced to shutter their doors for the time being.

What’s more, there were measurable effects in the decline of other emission types from the drop in coal use during the same time, compared to years prior.

China Coal Use FInal

Back to the Status Quo?

In recent weeks, China has been able to flatten the curve of its total COVID-19 cases. As a result, the government is beginning to ease its restrictions—and it’s clear that social and economic activities are starting to pick back up in March.


Source: European Space Agency (ESA)

With the regular chain of events beginning to resume, it remains to be seen whether NO₂ emissions will rebound right back to their pre-pandemic levels.

This bounce-back effect—which can sometimes reverse any overall drop in emissions—is [called] “revenge pollution”. And in China, it has precedent.

Li Shuo, Senior climate policy advisor, Greenpeace East Asia

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