China is living the future of mobile pay right now

Evelyn Cheng | CNBC

Customers can buy traditional Chinese calligraphy brushes at this Xi’an, China, store using QR payment codes. From left to right: WeChat Pay, Alipay and the QR code for the store’s WeChat account.

The growth of mobile pay in China comes off a solid base of smartphone users. The ubiquitous WeChat messaging app from Chinese technology giant Tencent reached 963 million monthly active users in the second quarter. In professional settings, adding each other on WeChat sometimes replaced business card exchanges.

Alipay, which is owned by Alibaba affiliate Ant Financial Services, has 520 million users, according to its international website.

The app is linked to online money market fund Yu’e bao, encouraging users to invest and spend with Alipay. Attractive interest rates of nearly 4 percent or more have turned it into the largest money market fund in the world, with 1.43 trillion yuan ($217 billion) as of the end of June, according to state media reports citing Yu’e bao’s manager, Tianhong Asset Management.

Hong Kong-based research investment company CLSA expects Chinese electronic payments volume to quadruple to 300 trillion yuan by 2021. During that time, online wealth management products’ assets under management should triple to 6.7 trillion yuan and online loans could also triple to 3.5 trillion, said Elinor Leung, head of Asia Telecom and Internet Research at CLSA.

“High mobile internet and ecommerce penetration, and an underdeveloped traditional financial market will drive growth,” Leung said in a Sept. 5 report.

Mobile pay is growing so rapidly in mainland China that as a foreigner I sometimes found it difficult to complete basic transactions without it.