China will soon be the largest mobile payments market in the world. China’s mobile payments market is expected to soar 48% year on year to 410 million users by 2013, according to a new report from Celent. Key findings of the report include:
- Overseas experience shows huge potential for mobile payments in markets that have government support, close cooperation between financial institutions and mobile operators, low bank card penetration, and high mobile phone penetration. In fact, all these factors are present in China, where the penetration rates for bank cards, credit cards, and internet banking are only 35%, 13% and 21%, respectively. The market grew slowly in the past, but now many market players have gained experience through their pilot projects and have established their own business models. These players are now advancing into the entire Chinese market. As such, the market is expected to enter a phase of rapid development.
- China is the largest mobile phone market in the world in terms of number of users: 740 million in 2009. In terms of remote mobile payment, the penetration rate in the Chinese market was only 10% in 2009, but the number of remote mobile payment users is expected to reach 410 million by 2013. The penetration rate for contactless mobile payments was only 0.5% in 2009. The number of users for contactless mobile payments through mobile phones is expected to exceed 400 million in the Chinese market by 2015.
- The main players in the mobile payment market include mobile operators, banking institutions, and third party payment companies. Mobile operators are mainly positioned to carry out contactless mobile payments. Banking institutions are licensed to handle large transactions and are able to provide complex financial products. Third-party payment companies are more competitive in terms of product innovation and discounts. Although it is too early to predict which firm will become the top player, mobile phone operators have the largest market share and have made the largest investments. Among all the operators, China Mobile has the largest share.
- Although remote mobile payments and contactless mobile payments are both made using mobile phones, they are two different business models with very different markets. In the long run, remote large value mobile payments will become the key development focus of China UnionPay and various operators, and the transaction total for remote mobile payments involving large amounts will far exceed contactless mobile payments. More payment tools such as bank cards, credit cards, and prepaid cards will be integrated into the mobile phone, which will then become the main payment method. It is worth noting that a huge market will open if China UnionPay succeeds in linking the SD card to credit cards and bank cards.
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