Many a brave pioneer has attempted to break into the highly desirable China payments market without success. Yet as the first foreign licenses are granted and PayPal awaits theirs, other global providers question whether it is once again time to venture east. The Shift Thought “Digital Money in China 2013” provides a guidebook to would-be marketers, with unique insights on the current state of play and potential navigation strategies for each category of player. It will not be possible to succeed in Mobile Payment and Mobile Money without understanding the larger context of Digital Money .

The size of the prize

It does not take long to convince any senior management team that the potential of the China payments market is massive. Homogenous, large segments do exist within the population of 1.35 billion. This major and rapidly growing economy is rapidly opening up to new technology and electronic commerce. Alipay, part of the mammoth Alibaba group has long ago claimed to have users in excess of the number of customers PayPal has world-wide, with a reported 550-700 million registered digital wallet holders.

Now they, along within an army of 250 other would-be payments providers equipped with third-party payments provider licenses are rapidly seizing key segments. Over 2013 the trend is for them to offer mobile wallets to their existing digital wallet customers. Historically Shift Thought believes this is the first time that new mobile services can start up with an existing captive base of hundreds of millions who can use the services on cheap smartphones through high speed mobile internet connections.

“Big hitter” providers hail from across multiple industries

The way this market has evolved is unique, as is the sheer variety of heavy-weight players bearing down on the alternative payments scene. The Chinese banks, now some of the largest companies in the world, are finding themselves at the starting line, as are the very large mobile operators. The relatively young and highly nimble payment operators grew beyond recognition, on the back of an SME market eager to do business on the Internet. Now they are using widely available, cheap smartphones and mobile internet technology to offer their digital wallets as mobile wallets to a captive consumer base of merchants and consumers shopping on the go.

Of the 32 services that we at Shift Thought monitor, there are many that present opportunities in China. Starting with Online Payment, we note large numbers of online banking, mobile banking and mobile payment users. Money transfer has been a highly desirable market, both within the country and internationally. The largest number of people in the world travel over the Chinese New Year, an indication of how many people live and work away from home and have a need to send money home.

The perils of the Chinese market

Since before 2005 many have attempted to break into the Chinese market. Large foreign banks and mobile operators made do with small shares in large companies, as the only foothold that could blossom into something larger. However let alone mobile wallets, even mobile payments and mobile banking progressed at a snail’s pace as the authorities experimented with multiple standards before determining which to back. Local companies enjoy multiple advantages. Regulations come from many directions, and not unlike the US, this is a country where you simply cannot count on a single standardised market.

So why is 2013 different?

Payment providers grew rapidly in the absence of regulation, reaching a point where they presented a threat to a number of incumbent players. New regulations have forced them now to obtain licenses. Already many tranches of licenses have been granted; the latest ones even include foreign companies.

Meanwhile mobile payment standards are being finalised, and this should address the current problems of highly fragmented markets. There has also been a rapid spread of high speed mobile networks, and cheap smartphone handset to utilise the services.

The role of Digital Money

China presents a classic example in support of the Shift Thought Digital Money approach. Services started strongly on the Internet and have now gone mobile, in contrast to a number of African countries that grew on the M-Pesa Kenya model.

Regarding the relative importance of digital money services, China currently has the largest number of online shoppers in the world estimated at $1.29 trillion for 2012, with 220.65 million users in June 2013. Unless would-be new entrants understand the various existing dynamics and key players, they stand to risk losing out as the mobile money market explodes over 2013 and beyond. With the need for local partners, it is possible that large global players find themselves having to sit out the dance while their competitors take to the floor.

A navigational tool for the complex China payments market

Having attempted to enter this market on behalf of large mobile operator groups, global banks and money transfer operators, we at Shift Thought recognised the need for a navigational tool to steer entrants in their ambitions relating to entry into the China Payments market. Our latest report “Digital Money in China 2013” was written at the request of some of the most renowned world payment experts who had no means of obtaining the knowledge elsewhere. It offers an introduction to the complexities of the China payment market, regulations and timeline. It provides a complete guide on the ecosystem, with details on each initiative, player and partnership.

Our goal has been not just to deliver actionable insights to mobile operators, financial institutions, payment providers and vendors world-wide, but to also offer practical, concrete ways to progress on the insights. There are links to the websites of all the important regulators, providers and players, as well as details required for building your business case. Market segment and services are explored in detail to track the progress of e-money in the Chinese market.