Sometimes no cash allowed in the new payments world (I)

Published on 2016-12-05

There's nothing like a bit of personal humility to ensure you will not make the same mistake twice. David Liao, president and chief executive officer of HSBC Bank (China), had just finished his Hainanese chicken rice and went to the counter to pay for his lunch. To his surprise, the restaurant not only did not take MasterCard, but neither would it accept China UnionPay, China's dominant credit card accepted in 141 countries and regions.

Liao's lesson in just how technology has revolutionised China's payment systems became complete when the restaurant advised him they also did not accept cash. Instead, the business only accepted payment via WeChat Pay, the online payment platforms run by the social media app WeChat that is used by half a billion Chinese; or Alipay, the platform attached to e-commerce giant Ali Baba.

The Chinese consumers' extraordinary takeup of mobile and online platforms extends well beyond payments. Tourism Australia's Lisa Ronson says many Chinese restaurants no longer even supply a menu. The only way of ordering is in advance, via the restaurant's app (which naturally, you also use to pay). Ronson says 53 per cent of Chinese tourists coming to Australia book their holiday via a mobile device. Australians pursuing the Chinese consumer need to make technology investment a high priority, and mobile platforms will be particularly important.

E-commerce's influence on Chinese consumer goods is even more impressive, with Goldman Sachs Global Investment Research showing online shopping rocketed from 1 billion packages in 2007 to 10 billion delivered by 2014. Former ambassador to China Geoff Raby, who runs a business consultancy in Beijing, says the relatively low costs of e-commerce mean even smaller Australian operators can reach the enormous Chinese market with reasonable cost efficiency. Former foreign minister Bob Carr, director at the Australia China Relations Institute, notes e-commerce order fulfilment has reached efficiencies that many Australian startups would envy. "There's a staff member at the Australian consulate in Chengdu," says Carr, "who orders a new outfit online at 11.30pm and is wearing it the next day to the office."

Australian companies are already capitalising on the tremendous scale offered by China's embrace of e-commerce across every age group. Freedom Foods CEO Rory Macleod says the company, which leads the Health Cereals category with a 40 per cent market share, sold 120,000 units of just one product over three weeks during Chinese New Year on Alibaba's Tmall International platform. Freedom Foods has since fast-tracked its expansion into China.