Lydia, Circle Pay, Alipay, WeChat Pay… How instant mobile money-transfer is taking over our life to become one of the most promising markets
Good morning, everyone! Ready for our new article about mobile money transfers?
We think this market has a lot of potential, find out why ;)
Its aim is to facilitate money transactions for customers. Everything is simple, no need of a credit card or cash in your pockets, no extra fees. You just pay straight with your smartphone in a few seconds, whether it is for reimbursing a friend or to purchase a coffee. Their using is booming in Asia where cash and even credit cards are progressively disappearing, but it is not common for everyone yet, especially in Europe. HNFC breaks down instant mobile payments and its future.
WeChat, Alipay and the disappearance of cash in China
As for many other technological fields, Europe is far behind Asia concerning instant mobile payment. Tencent – one of the market leaders – directed a study in 2015 and showed that at this time, 68,8% of the Chinese population had already used a smartphone to complete a purchase in a store or restaurant. One year later, the mobile payment market in China was valued by the consulting firm iResearch around $5.5 trillion, meaning more or less 50 times the size of the American market ($112Bn). This phenomenon is mostly due to two apps, Alipay and WeChat – a multi-use tool developed by Tencent reuniting Facebook, WhatsApp, eBay, PayPal and many other things in one app only. The use of these two apps is already threatening the future of cash in the country. Stores, restaurants, taxis, even musicians in the streets are putting their QR Code on little boards to allow passers-by to transfer them tips. “Literally every businesses and brands in China are plugged into this ecosystem” according to Shiv Putcha, analyst and researcher with the International Data Corporation.
If local users are not used to it yet, occidental companies are seizing the opportunity to get closer to chinese consumers. Famous brands like Louis Vuitton, Hugo Boss or Dior are already on WeChat, using advertising campaigns specifically shaped for their young and ultra-digitalized chinese targets. Iconic names like Disneyland or even the Louvre have launched online WeChat stores, allowing to pay straight from the app. These big names are aiming to attract chinese tourists, known to be some of the biggest spenders, by giving them a familiar customer-experience and therefore are democratising these tools.
Pumpkin, Lydia and the european development of mobile payment
Lydia Solutions is a French company specialized in online mobile payment and one of the most popular platform of its kind in its home country. Its use is simple: first enter the amount you want to pay, then type in your secret code, and finally let the other party scan the QR code. If the person you want to pay is not with you, just enter his phone number, everything is made to be quick and easy. The company recently added CNP Assurances to its capital right after collecting over $13M during a fundraising while Pumpkin, one of its biggest competitors, has also attracted the attention of an insurance company. It has been bought by Arkéa, which announced an investment of over $15M in the company. Even if their success is not comparable to the Chinese phenomenon, Pumpkin has recently published a study showing that each a new user attracts six people from his entourage. Cyril Chiche, Lydia’s CEO, speaks about an “historical moment”, “We are living a revolution.” According to him, “After 27 centuries of use, cash is being marginalized”. Lydia has demonstrated that its use was not only limited to millennials but also to their parents and even some of their grand-parents. Companies like Lydia or Pumpkin are beneficiating of the publicity made by the arrival of the GAFAs (Google, Apple, Facebook, Amazon) which have all tried to launch mobile payment platform without seeing the expected success yet. These mastodons have brought the public spotlight onto the phenomenon but without devouring smaller companies. Better, according to Cyril Chiche, the number of Lydia users has never grown that fast before, the company hopes to double the figure by the end of 2018 to reach the 2 million-mark.
France and UK are the two biggest markets in Europe for mobile payment platforms. The American company Circle Pay recently opened an office in Paris. Its European Chief Executive, Marieke Flament, explained: “local competitors have helped us enter the market. There is a deep understanding of this market here, far deeper than other countries”. Companies are seeing the potential of this phenomenon, both in Europe and in the US.
Google Pay, Apple Pay and the worldwide future of mobile payment
On the 21st of February, Google announced the global rollout of its new app Google Pay, an updated version of Android Pay. Apple has also improved its payment platform Apple Pay recently. Both companies are relying more on the NFC technology to allow people to pay straight from their phone to the credit-card devices used in common stores, but not on particular-to-particular transfers via QR Codes or phone numbers. In opposition, Facebook launched the Messenger Payment platform, allowing users to transfer money in the same way they send a message with the Messenger app. There is no doubt that Apple and Google will soon arrive on that market too and make it grow on an even faster pace than it already is. In the US, the current leader is Elon Musk’s PayPal. The company has been running the online payment market for almost 20 years now. But its adaptation to the peer-to-peer transfer market is recent and it does not seem to reach the same success in Europe than in its home country. Competitors like Lydia and Pumpkin are aiming to beat PayPal on western Europe markets by proposing lower commission rates to merchants (1,5% instead of 3,4%). They are also creating partnerships with universities, engineering schools and business schools to reach their main target: students, more than 85% of their users being aged 18 to 30.
Trust is the main issue preventing mobile payment from growing even quicker. Consumers are still questioning the security of those apps, like every new payment method when it first arrived. Online payment, contactless cards… Eventually security gets stronger and everyone gets used to it. The problem is that if security gets stronger, authentication gets harder and the apps is less easy to use, which is its main asset. There is no doubt, that instant mobile payment will eventually overcome that fear but this obstacle will slow its growth. Should You jump into the phenomenon? It looks like sooner or later, you will have to do so.
Written by Tim Rouger│ Independent Stock Analyst
Edited and Corrected
by Vee Venski
This article is not a promotion of financial investment. Investing money in financial instruments is risk-reward process. Losses and gains are part of financial investment process. Only invest money you can afford to lose.