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Li Yian

BEIJING — Two events this spring, seemingly unrelated, together offer a snapshot of where China has arrived in finance-related technology, commonly referred to as "fintech." On April 17, the Bank of Communications, one of the largest Chinese banks, launched a new "mobile credit card" product, making it the first bank to make a credit card's features completely digital: from the initial card application, to approval, issue and use, the entire process occurs online.

Then the very next day, on April 18, the first "Cashless Alliance"in the world was launched by Ant Financial, an affiliate company of the Alibaba Group, with the collaboration of the United Nations Environmental Agency and 15 other partners to promote finance mechanisms with ecological benefits.

Ant Finance will also inject 6 billion RMB ($870 million) of investment in the next two years to develop tech capabilities and support the Alliance partners.

Both initiatives hit the ground running. The Mobile credit card received more than 833,000 applications within two weeks, and 81% of the applications were approved within 30 seconds; meanwhile, the Cashless Alliance registered more than 1000 companies and shops that had applied for the program.

These two separate events are in fact moving towards the same goal: the first is to eliminate physical credit cards, the second is to eliminate cash. If physical credit cards and cash both disappear, accounts will become the only payment entry and the financial industry's digital upgrade will succeed.

A senior executive at a third-party payment service provider told Economic Observer: "With physical credit cards and cash gradually being replaced, competition among financial institutions will shift from the payment method to the payment gateway," the executive said. "Banks now realize that they ought to build up their own mobile accounts and actively win over-the-mobile payment clients."

The cake is getting bigger

WeChat Pay, a digital wallet app of the Chinese tech group Tencent, and the biggest rival of Alibaba group's Alipay, already introduced the world's first "Cashless Day" concept in September 2015 with 10 participating banks and some 80,000 retailers. In the past two years, apart from these two major payment service platforms, more and more vendors, service providers as well as banks are taking up the digital wallet idea as an option. "In the first and second-tier cities, many customers are adopting a card-less and cash-less lifestyle," the product manager of a commercial bank's credit card department told this newspaper. "Banks must now strive to launch their own mobile credit card."

Bank managers have noted that, whether it's Alipay or WeChat Pay, the tech giants don't voluntarily share data they collect about the customers. Wang Weidong, who heads the credit card department of the Bank of Communications, says innovation of the mobile credit card is a part of a broader product strategy to handle the homogenization of China's credit card issuing competition. "The breakthrough is that a bank's credit card department transforms its function from being just a card issuer to being a provider of consumer credit, a mobile internet platform and a mobile payment system."

Shi Wenchao, the CEO of China UnionPay, a Chinese financial services corporation, recently declared that physical banking cards "will soon disappear." Mobile payments are becoming ubiquitous as the mobile phone has gone far beyond the scope of an instant messaging device. "(It) has become a personal information processing system terminal, indispensable at any moment," Shi wrote in a recent quarterly report. "How to grab a slice of the cake in sharing this "National Total time" is essential in the study of business behavior. How people pay is no exception."

According to iResearch, in the fourth quarter last year, the vast majority of China's mobile payments was shared between Alipay and WeChat Pay, accounting for 55% and 37 % of market share respectively.

"It looks as if these two giants have monopolized the whole market," said an industry insider close to Alipay. "But demand has mainly come from the first and second tier cities. There remains a huge market to explore in the third and fourth-tier cities. We are talking about a multi-billion (dollar) market. The cake is getting bigger and everybody's share is bound to grow as well."

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