Apr 9, 2019

American, Chinese companies compete for U.S. mobile payment adoption

Erica Pandey, author of @Work

The race is on — between American and Chinese companies alike — to get U.S. consumers to pay for everything with their phones. But as the chart below makes plain, that market barely exists.

Expand chart
Adapted from CivicScience; Chart: Andrew Witherspoon/Axios

Driving the news: Alipay — the mobile payment app from Ant Financial, Alibaba's fintech spinoff — has established a beachhead in the U.S., expanding to thousands of pharmacies, convenience stores and the Mall of America.

  • The company has insisted it is only targeting Chinese tourists, but industry analysts say Alipay has the potential to break open the U.S. market.
  • And Alipay has already spread out of China, says Thad Peterson, a senior analyst with the research firm Aite Group. Scores of consumers in developing countries in Asia have adopted it.

Meanwhile, Apple and Facebook are trying to capture payments, too.

But, but, but: As Axios' Dion Rabouin reports, the U.S. is growing increasingly out of step with the rest of the world. In China and India, cash is quickly becoming obsolete, and in Europe, paying with the phone is catching on as well. But Americans remain attached to their cards.

  • That's because, says David True, an analyst with PayGility, "Paying with a phone today does not offer much if any incremental benefit to paying with a card" in the U.S.
  • Only individual retailers, like Starbucks, which offer rewards for using their mobile payment option, offer any benefit.
  • Last year, Starbucks' payment app had more users than Apple's or Google's.

What to watch: Mobile wallets will start to grab more of the U.S. market in the next five years, says Peterson. The big area for U.S. growth is through contactless cards in mobile wallets that enable "tap and go" paying, he says — but that still keeps cards front and center.

  • There, companies like Apple, which are rolling out cards in partnership with a bank like Goldman Sachs, have the upper hand.

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