Elisabeth Braw
Paying with plastic is easy, but for merchants, credit cards come with pesky fees. Imagine if consumers instead used mobile payment apps that charged much lower fees. Such apps are conquering the world—led by Chinese giants Alipay and WeChat Pay. Last month, JPMorgan announced it will be partnering with Alipay. All this creates a lot of data the Chinese government will want access to. Convenient payment for coffee, groceries, and other daily items could become a national security risk.
Two years ago, U.K.-based Barclaycard issued a press release that didn’t get much attention. “Barclaycard partners with Alipay to help U.K. merchants increase sales from booming Chinese tourism,” announced the credit card firm, which processes nearly half of all credit card transactions in the United Kingdom.
The reason the announcement flew under the radar is not many Europeans were using Alipay (which is owned by tech conglomerate Ant Group) or its fellow Chinese archrival, Tencent-owned WeChat Pay. Instead, Barclaycard’s announcement concerned the U.K.’s around 1 million Chinese residents and tourists. The pandemic meant Alipay got off to a rocky start in the U.K., but in filings last month, the company said its growth opportunities in the United Kingdom and other European countries were “significantly heightened.”
Alipay and WeChat Pay already have around 1 billion users each, primarily in Asian countries. Launching the service for Chinese residents and visitors in Europe is a shrewd strategy, especially considering that between 2010 and 2019, the number of Chinese tourists abroad nearly tripled to 155 million people.
Last year, Alipay and WeChat Pay both launched a partnership in Italy with duty-free shop operator Dufry. And last month, JPMorgan Chase, which is not only an investment bank but also the United States’ leading credit card payment-processing provider, announced it will partner with Alipay to process online purchases on Alibaba.com, the online shopping site. That means U.S. consumers’ purchases will go through Alipay.
Once merchants get started on the apps, chances are they’ll love them because Alipay and WeChat Pay charge far lower merchant fees than credit card companies: 0.55 to 0.6 percent compared to credit card companies’ 1.5 to 3.5 percent. Although PayPal is often cheaper than credit cards, it’s only available online. For the user, meanwhile, Alipay and WeChat Pay are just as easy to use as plastic cards, Apple Pay, or Google Pay. By outflanking credit card companies (though they sometimes cooperate with them), Alipay and WeChat Pay seem destined for explosive popularity and growth.
Terrific, many observers and shoppers might say: Innovation is creating an alternative to companies that have been enjoying a near-total grip on the cashless market. But that view is shortsighted. Last month, it emerged that the Chinese government plans to break up Alipay’s parent company, Ant Group, and force Ant Group to turn over user data to a company partly owned by the government. What user data might that be?
Courtesy of Apple, whose App Store now lists the data each app collects, we know Alipay collects information about, among other things, your health and fitness, location, contacts, user content, and search and browsing history. WeChat Pay collects similar data. Apps based in the West, too, collect far more data than they ought to. (Just take a look at Facebook in the App Store.) But since 2017, when China introduced a new national intelligence law, China-based companies are also obliged to assist the Chinese government.
In other words, if Beijing wants to gain a detailed picture of people in a particular country, it only needs to ask the Chinese companies whose services those people use. In recent months, Beijing has been showing who’s the boss in the tech sector, not only forcing Alibaba to split but also scolding other major firms.
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