Throughout the ages people have engaged in commerce to exchange goods and services for payment. Yet it wasn’t until around 1,100 BC when China introduced the first standardised currency. The money was miniature replicas of tools cast in bronze, before being replaced by more-practical, rounded metal pieces. This was followed by other iterations including leather, such as white deerskin bills a foot in length. Then around a thousand years ago, during the Song Dynasty, China introduced the world’s first paper money.
Although China pioneered many of the money concepts and forms that we use today in modern commerce, the country failed to modernise as the world adopted plastic cards and electronic transactions. Less than ten years ago, most Chinese would still carry wads of notes, taken from the stash under their mattress. Then something remarkable happened. Over the past decade, helped by the rise of ecommerce, smartphones and clever marketing strategies, mobile payments hit the mainstream to again leapfrog China to the forefront of payments technology.
China had 805 million people making payments on their mobile at the end of 30 June 2020, accounting for 86% of internet users. In 2017, Americans collectively spent $50 billion on mobile payments, while Chinese consumers spent $12 trillion. Chinese transactions have grown hundreds of percent since, with $9 trillion spent just in Q2 this year.
China’s mobile payments leadership is symbolic of China’s aspiration to be a global leader in innovation within 15 years, as it outlined in its 14th all-important Five Year Plan. Ant Group and its hero service Alipay is one of the prodigal sons of this tech strategy. In addition to driving the adoption of mobile payments in China, Ant has capitalised on China’s liberal attitude towards privacy issues to use its realm of big data to drive other services. It now makes more revenue from lending, than payments, however that lending may be impacted under new regulations around funding loans.
It’s those fundamentals and national pride that saw ‘mom-and-pop investors’ stump up $3 trillion to oversubscribe to Ant Group’s scheduled IPO on the Shanghai and HK stock exchanges. From retail investors alone, it attracted a bid value equivalent to Britain’s gross domestic product. The company was looking to raise almost $37 billion in the largest IPO the world has ever seen, valuing the company at $313 billion, larger than some of America’s biggest banks including Goldman Sachs and Wells Fargo. As Jack Ma noted, this is “the first time that such a big IPO was priced outside of New York City, which we wouldn’t have dared to think about five, or even three years ago.”
That was before the bombshell news broke late yesterday that Thursday’s IPO was suspended by Beijing. There is speculation that it is the result of Jack Ma’s public speech last week which criticised China’s financial system; and acts as a reminder of how things can work in the market. On top of this, the suspension signals that Beijing remains wary of large tech companies encroaching on its financial sector and that innovation leadership goals will not progress unabated.
Although the rise of Ant and Alipay seemed unstoppable before the IPO suspension, not everything it touched had turned to gold. The next targeted evolution in its payment system – the futuristic facial payments – hasn’t been as popular as the company had hoped, particularly given the widespread adoption of the technology in China. Facial scanning is another technology that the country leads in, with almost one camera for every two people expected to be operating in China by the end of this year. Facial recognition has helped contain spread of Covid-19, identifying people wearing masks, and even monitoring individuals’ temperatures. It has been incorporated into security and policing, public transport and caught jaywalkers. In the marketing and retail sphere, facial recognition provides some very exciting possibilities for personalisation and upselling relevant services based purely on expressions.
Chinese have historically embraced technology and have been relatively unfazed by privacy issues, allowing big data and Artificial Intelligence (AI)-fuelled applications to flourish in China. Yet, recently there has been genuine push back about facial recognition going a step too far in the road to Orwellian. Amid mounting public concerns over biometric data safety, Hangzhou – ironically Jack Ma’s hometown and his companies’ headquarters – has become China’s first city to prohibit the compulsory use of facial recognition in residential communities. A 2020 report on facial-recognition applications suggests that over 60% of people in China think the technology is overused, while over 30% said their facial information had been leaked or exploited.
Platforms and brands in China will continue to push limits around big data, AI and facial recognition, supported by pro-tech government policy. But it is likely that consumers will increasingly push back about privacy concerns and policy makers will progressively need to balance these concerns. Brands should take note!
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