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The Growth of the Digital Payment Ecosystem in China

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ALIBABA AND TENCENT ARE LEADERS OF THIRD PARTY PAYMENT SEGMENT

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The Growth of the Digital Payment Ecosystem in China

  1. 1. SY Lau Senior Executive Vice President Chairman of Group Marketing and Global Branding
  2. 2. REDESIGNING EDUCATION FOR INDUSTRY 4.0
  3. 3. SY主题演讲
  4. 4. DIGITAL’S PERCENTAGE OF CHINA’S GDP AND GROWTH RATE China’s GDP Digital Economy Source: China Academy of Information and Communication Technology ( CAICT ) , Ministry of Industry and Information Technology ( MIIT ) 15.2% 30.3% 2008 2016 YoY Growth Rate 21.3%
  5. 5. CHINA IS A LEADING COUNTRY IN THE DIGITAL ECONOMY Source: McKinsey Global Institute (MGI), CHINA’S DIGITAL ECONOMY: A LEADING GLOBAL FORCE, August 2017 42.435.0 24.1 64.6 33.5 2005 2016 790 74 China U.S. 34 43 47 45 19 12 Number of unicorns Valuation <1.0 Retail E-commerce Transaction Value %, $ billion 100%= 495 1,915 Mobile payments, 2016 $ billion Global unicorns, June 2016 %; number; $ billion 11x 100%= 262 883 CHINA U.S. Rest of the world CHINA U.S. Rest of the world
  6. 6. BEYOND PAYMENT A NEW DIGITAL HORIZON
  7. 7. 1 THE OVERVIEW OF CHINA PAYMENT LANDSCAPE
  8. 8. Source: The People's Bank of China, National Bureau of Statistics of China, United Nation based Better Than Cash Alliance 63% 33% 2011 2012 2013 2014 2015 2016 Cash % Non-cash % The Decline of Cash Usage Total consumption The Rise of Third-party Payment Retail-related Consumption - 20 40 60 80 2012 2013 2014 2015 2016 Bank Third-party Third-party Payment 2012-2016 CAGR: 52% Bank Card Payment 2012-2016 CAGR: 25% RMB Trillion THE OVERVIEW OF CHINA PAYMENT LANDSCAPE
  9. 9. Customers Cash Bank Cards Bills Debit Transfer Business Financial Institutions Government Non-Cash Payment Small Business Large Corporate BUILDING THE 3rd PARTY NETWORK ON HANDLING OF THE C2B OR SMALL ENTERPRISES B2B PAYMENT FLOWS Source: Bernstein Analysis
  10. 10. Source: CB Insights; Ipsos, 18,000 customers surveyed THE OVERVIEW OF CHINA PAYMENT LANDSCAPE Mobile Payments Penetration Rate, 2016 48%77% China U.S. 790 74 China U.S. Mobile Payments, 2016 11x $ Billion
  11. 11. Source: United Nation based Better Than Cash Alliance; iResearch 2.9 33X 23X 85X Trillion USD 2016 Combined Payments of AliPay and Tencent Payment 2012-2016 Combined Payments of AliPay and Tencent Payment Increase by 2012-2016 AliPay Payment Increase by 2012-2016 Tencent Payment Increase by ALIBABA AND TENCENT ARE LEADERS OF THIRD PARTY PAYMENT SEGMENT
  12. 12. Source: iResearch, PBOC, PCAC, Bernstein Analysis 41% 48% 55% 55% 59% 62% 62% 66% 69% 72% 74% 83% 92% 93% 94% Cross-board Transfer Insurance Beauty care Gaming payment Education Utility bills Entertainment Lottery Financial products Credit card repayment Food delivery Air tickets Money transfer Telephone bills payment Online shopping THE EMERGENCE OF CHINA CASHLESS SOCIETY. A REALITY, NOT A MYTH. E-payment’s penetration in daily consumption scenario
  13. 13. 1 THE OVERVIEW OF CHINA PAYMENT LANDSCAPE 2 THE EVOLUTION OF CHINA CASHLESS SOCIETY
  14. 14. PHASE I: FROM 0 TO 1 Infrastructure Building ∞ Challenges Consumer Adoption THE EVOLUTION TOWARDS A CASHLESS SOCIETY IN CHINA Drivers Digital Infrastructure Digital Users Digital Pioneers
  15. 15. GOVERNMENT AS A POLICY MAKER, INVESTOR, INNOVATOR, AND CONSUMER 1994.4 The National Computing and Networking Facility Project 2000 The birth of China’s Mobile Internet 2000.4 4 Major network: CSTNET, CHINANET, CERNET, CHINAGBNET realized interconnection 2009.1 The birth of the “3G” Era 2009.11 The “Internet of Things" strategy 2013.8 The "Broadband China" strategy 2013.12 The birth of the “4G” era
  16. 16. A MULTI-FACETED AND MULTI-INDUSTRY DIGITAL ECOSYSTEM A ubiquitous network connection enabled the very first tipping point
  17. 17. A WORLD CLASS E-COMMERCE ECOSYSTEM Launched in 2005 Launched in 2004
  18. 18. ALIBABA’S MILESTONES IN THE EVOLUTION OF PAYMENT Source: www.wikipedia.org 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Alipay established Alipay became one of the first third-party payment providers Alipay launched a financial product platform Yu'ebao Alipay was re- branded as Ant Financial Alipay payments value was less than RMB 0.5 trillion
  19. 19. Source: CNNIC, eMarketer CHINA HAS THE WORLD’S LARGEST NUMBER OF MOBILE USERS 724 Million 52%+ of China’s Population Utilize Mobile Access 733 Million Europe and North America’s Utilization of Mobile Access CHINA Europe and North America Rest of the world
  20. 20. Drivers Tipping Points Challenges PHASE II: FROM 1 TO N Flying Wheel Effect PHASE I: FROM 0 TO 1 Infrastructure Building Consumer Adoption Ubiquitous Network Connection Digital Infrastructure THE EVOLUTION TOWARDS A CASHLESS SOCIETY IN CHINA Ecommerce Digital Users Digital Pioneers Mobile Payment Adoption Mobile Internet Open Platform Innovation Social Connectivity
  21. 21. WeChat Pay 9.6% AliPay 77.8% Others 12.6% WeChat Pay 39.8% AliPay 54.5% Others 5.% Mobile Pay Market Share (2014Q1) Mobile Pay Market Share (2017Q2) WECHAT PAY ACHIEVED ALMOST 40% MARKET SHARE IN 4 YEARS Source: iResearch *Notes: WeChat Pay market share also includes QQ wallet
  22. 22. Video:WeChat HONG BAO
  23. 23. Drivers Tipping Points Challenges PHASE II: FROM 1 TO N Flying Wheel Effect PHASE I: FROM 0 TO 1 Infrastructure Building Consumer Adoption Mobile Payment Adoption Ubiquitous Network Connection WeChat “Hong Bao” Digital Infrastructure Mobile Internet THE EVOLUTION TOWARDS A CASHLESS SOCIETY IN CHINA Ecommerce Digital Users Digital Pioneers Open Platform Innovation Social Connectivity
  24. 24. WECHAT HONG BAO: COMBINES PAYMENT WITH LOCAL CULTURE 2015 2016 1Bn 9.08Bn 14.2Bn 20172014 Total Number of Hong Bao Sent on the Chinese New Year’s Eve (2014-2017) 20Mn *Notes: Hong Bao, includes WeChat and QQ Platform Data
  25. 25. - 100 200 300 400 500 600 2011 2012 2013 2014 2015 2016 2017 Increase 232 Mn The Growth of China Mobile Payment Users War of Online Taxi Hailing THE MARKET SHARE WAR OF ONLINE TAXI HAILING Million Source: CNNIC, 2011-2017
  26. 26. - 100 200 300 400 500 600 2011 2012 2013 2014 2015 2016 2017 Increase 232 Mn The Growth of China Mobile Payment Users War of Online Taxi Hailing THE MARKET SHARE WAR OF ONLINE TAXI HAILING Million People Completely Accepted Cashless Payment Source: CNNIC, 2011-2017
  27. 27. QR CODE: VIRTUALLY CONNECTING EVERYTHING
  28. 28. Video:CNN Living in Beijing Without Wallet Packet
  29. 29. Drivers Tipping Points Challenges PHASE II: FROM 1 TO N Flying Wheel Effect PHASE I: FROM 0 TO 1 Infrastructure Building Consumer Adoption Mobile Payment Adoption Ubiquitous Network Connection WeChat “Hong Bao” Digital Infrastructure Mobile Internet THE EVOLUTION TOWARDS A CASHLESS SOCIETY IN CHINA Ecommerce Digital Users Digital Pioneers Taxi Mobile Wallet Warfare “Scan” QR-Code Open Platform Innovation Social Connectivity
  30. 30. Drivers Tipping Points Challenges PHASE II: FROM 1 TO N Flying Wheel Effect PHASE I: FROM 0 TO 1 Infrastructure Building PHASE III: FROM N TO Digital Civilization ∞ Consumer Adoption Mobile Payment Adoption Ubiquitous Network Connection WeChat “Hong Bao” Digital Infrastructure Mobile Internet THE EVOLUTION TOWARDS A CASHLESS SOCIETY IN CHINA Ecommerce Digital Users Digital Pioneers Taxi Mobile Wallet Warfare “Scan” QR-Code Open Platform Innovation Social Connectivity User Centric Ecosystem
  31. 31. Big data Internet of Things Cloud Computing Artificial Intelligence Health Care Government Transportation Education Business Manufacturing Industry Agriculture Tourism Finance Entertainment “INTERNET PLUS”
  32. 32. A WECHAT ENABLED SMART GALAXY MUNICIPAL SERVICE SOCIAL SECURITY MEDIA SERVICE TRANSPORT EDUCATION SOCIAL BUSINESS TOURISM CONSUMPTION WeChat City Service 362 Cities 310 Million Users Source: Tencent Internal Data, 2016
  33. 33. XIONG’AN: A CUSTOMIZED SMART CITY SOLUTION Tencent Big Data Tencent Cloud Tencent TrustSQL XIONG’AN NEW AREA FinTech Tencent Cloud- based “BaaS”
  34. 34. Drivers Tipping Points Challenges PHASE II: FROM 1 TO N Flying Wheel Effect PHASE I: FROM 0 TO 1 Infrastructure Building PHASE III: FROM N TO Digital Civilization ∞ Consumer Adoption Mobile Payment Adoption User Centric Ecosystem Ubiquitous Network Connection WeChat “Hong Bao” Digital Infrastructure Mobile Internet Blockchain Technology The Internet Plus Policy THE EVOLUTION TOWARDS A CASHLESS SOCIETY IN CHINA Ecommerce Digital Users Digital Pioneers Taxi Mobile Wallet Warfare “Scan” QR-Code Verified Personal ID and Social Credit Scoring System Public and Private Sectors Adoption Open Platform Innovation Social Connectivity
  35. 35. 1 THE OVERVIEW OF CHINA PAYMENT LANDSCAPE 2 THE EVOLUTION OF CHINA CASHLESS SOCIETY 3 THE OPPORTUNITIES OF DIGITAL CIVILIZATION
  36. 36. CAPTURING OPPORTUNITIES OF DIGITAL CIVILIZATION Do not jump into bandwagon without best expertise
  37. 37. CAPTURING OPPORTUNITIES OF DIGITAL CIVILIZATION Do not jump into bandwagon without best expertise Use technology as both a driver and a guardian
  38. 38. Speedy Acquiring Clearing & Settlement Red PacketsWallet Bank Channels: 200+ Payment Performance: 208,000+/second Receivable Capacity: 1 billion+/day Service Availability Rate: 99.999% Bank Connection Disaster Recovery: Auto Switching in Seconds Payment Disaster Recovery: Multi-active Cross Data Center Replication A SECURED AND STABLE DATA OPERATIONS OF TENCENT WeChat Pay Platform Source: Tencent Internal Data
  39. 39. CAPTURING OPPORTUNITIES OF DIGITAL CIVILIZATION Believe in the value of a joint-effort ecosystem Do not jump into bandwagon without best expertise Use technology as both a driver and a guardian
  40. 40. “人类以互联网为连接,形成前所未有的‘网络空间命运共同体’。 不是任何一家公司或组织可以凭借一己之力就能够完全解决和应对,需要 各国政府、行业合作伙伴以及社会各界一起探索,以开放分享的态度,进 行共建、共治。” “Humans are connected by the internet, forming a ‘Community o Common Destiny in Cyberspace’. No single company or organization is able to take this challenge on by itself. In fact, it requires an open mindset and the joint efforts of governments, industry partners and various social groups to build and govern together.” ——Huateng Ma Chairman of the Board and CEO
  41. 41. BELIEVE IN THE VALUE OF A JOINT-EFFORT ECOSYSTEM Malaysia Mobile Digital Payment Policymakers Financial Institutions Technology Companies Startups Other Businesses
  42. 42. CAPTURING OPPORTUNITIES OF DIGITAL CIVILIZATION Do find the Malaysian-way of digital journey Do not jump into bandwagon without best expertise Use technology as both a driver and a guardian Believe in the value of a joint-effort ecosystem
  43. 43. CONSISTENTLY PROMOTING INNOVATION, BUILDING A PAYMENT ECOSYSTEM Source: Payment related speeches of YBhg. Tan Sri Muhammad bin Ibrahim; BNM Payment System Forum & Exhibition 2013 - 2017 2013 • Migration to e-payments • Enhancing payment system infrastructure • Improving accessibility, security and convenience 2015 • Moving Forward with e-Payments • Elaborate on the importance of collaborative efforts 2014 • Migration to e-payments • Adoption of debit cards • Promoting financial inclusion 2016 • Moving Forward with e-Payments • Promoting competition, collaboration and innovation • Open and competitive Payment and Settlement Systems 2017 • Mobile Payment is the Next Wave • Promote efficiency, competition and innovation • Strengthen industry alignment • Supporting inclusive governance
  44. 44. Tan Sri Muhammad bin Ibrahim Governor of the Central Bank of Malaysia (Bank Negara Malaysia) “For many years, Bank Negara Malaysia has taken the leading role in shaping the development of the country’s payment systems, in line with its statutory mandate to promote safe, efficient and reliable payment systems.” Source: Muhammad bin Ibrahim: The dawn of a new era in Malaysia's payment systems, at the Malaysian E-Payments Excellence Awards, Kuala Lumpur, 22 May 2017.
  45. 45. Terima Kasih

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