While current mobile wallet-focus is on payments, Forrester believes their future use will enable smarter and more efficient commerce experiences, particularly in Asia. The delivery of value-added services-before, during, and after the payment moment-is key.
Chinese digital juggernauts Alipay and WeChat have developed their mobile wallets into rich customer engagement platforms, offering new opportunities for mobile marketers.
Like other sectors of the digital ecosystem such as messaging apps, mobile wallets are evolving at a faster pace and on different vectors in China. In the West, mobile wallets primarily focus on payments and adjacent features like loyalty cards, tickets, and coupons, but mobile wallets from Alipay and WeChat have evolved into something new and different.
In China, phone = wallet
Chinese consumers understand the concept. 76% of metro Chinese consumers use mobile wallets or are interested in doing so, compared to 36% of the urban online US population. In terms of mobile app adoption, payment apps are second only to weather apps-51% of online adults who use a mobile phone in metro China have adopted a payment app. When Tencent’s top messaging app WeChat first launched its mobile payment service it acquired 100 million users in less than two weeks.
These mainland firms became frontrunners by leveraging resources within their ecosystems: combined, Alibaba’s Taobao/Tmall and Tencent’s WeChat total 889 million monthly active users. New services include group buying, online travel agencies, ride-hailing, and food delivery services. The associated mobile wallets are key to these varied mobile services, and have evolved into lifestyle platforms.
Sheer dominance of scale in the Alipay/WeChat mobile universe enforce customer loyalty and create a formidable barrier to entry, keeping potential competitors at bay. Both mobile wallet operators constantly test new features, including experiments like Alipay’s Life Circle feature-which was taken down a few days after launch. More successful features include digital IDs, and smart-city services like applying for visas, scheduling hospital visits, and viewing traffic offenses.
Different genes spawn different approaches
Both Alipay and WeChat aggressively add sophisticated engagement features to their mobile wallets, but WeChat’s social nature and Alipay’s commerce gene create different wallet innovations that apply to different stages of the customer lifecycle.
In China, B2C marketing professionals can now use innovative coupon and offer formats, such as AR (augmented reality) coupons. In addition to regular coupons and display ads, both wallets successfully invented new formats, like “red packets.” In 2016, Alipay launched an AR mobile game: “Catch The Tmall Cat”-more than 30,000 retail stores participated, including KFC, Shanghai Disneyland, and Starbucks. The latter gave away 270,000 AR coupons, and Alibaba expanded the campaign into a permanent AR feature that allows marketers to hide red packets in an offline store for consumers to find. Retailers like Uniqlo used similar mobile wallet features to entice consumers into bricks-and-mortar stores.
Multiple enhancements
In addition to location-based services in local markets, Chinese mobile wallets provide features for cross-border travel and shopping. Alipay’s home page pushes banners advertising tourist spots to consumers when they travel to another country. Restaurants, duty-free shops, and tourist spots have joined the Alipay campaign to attract Chinese travelers.
Alipay has partnered with 100,000 retailers in 70 countries and regions and with tax-rebate companies in 24 countries to provide cross-border shopping and tax rebate services to Chinese travelers. In collaboration with Global Blue, Alipay’s tax rebate service was upgraded to a real-time digital service in February 2017.
Both Alipay and WeChat have integrated third-party services like Didi and Uber for ride hailing and Dianping and Meituan for food delivery.
As mobile wallets let customers save brand-loyalty cards, marketers leverage this to engage consumers. WeChat went a step further, adding a social gifting feature to its mobile wallet. Starbucks was the first brand to leverage this feature; the partnership puts a Starbucks-branded button in WeChat Wallet, enabling users to instantly and conveniently give a Starbucks beverage or digital gift card to their WeChat friends. Users sent tens of thousands of social gifts in just two weeks.
Mobile wallets worldwide
Market-entry obstacles like different business cultures, consumer behaviors, and regulations make it unlikely that Alipay and WeChat will operate directly in markets beyond its Chinese base. But successful marketing use-cases developed on Alipay and WeChat Wallet will inspire third-party players like Apple and PayPal.
We expect mobile wallet innovations to happen more quickly in emerging markets due to less competition and fewer legacy systems. PayTM in India is a good example: it provides display ads for coupons and offers within its digital wallet, and features product information and digital receipts to engage customers before and after purchase.
PayPal has added features like “stores nearby” and “order ahead.” Other digital ecosystem players like Apple, Facebook, and Google, may merge their other customer engagement tools with a mobile wallet. Gmail for Android now lets customers transfer money in-app.
With their differing ecosystems, the West’s mobile wallet players face more competition than their Chinese counterparts. This gives third-party providers like vibes.com and Urbanairship opportunities to add customer engagement features and offerings to Western mobile wallets and uncover the potential of marketing.
Recommendations for mobile wallet adoption
Build a localized strategy for mobile wallets: global brands are frequently slow to take a localized approach in adopting new technologies like mobile wallets. For example, Starbucks was a pioneer in the US when it successfully combined its loyalty app with a mobile payments system-but it was a laggard in China, as it couldn’t leverage “mobile moments” there. The brand succeeded in 2016 by partnering with WeChat and launching its social gifting campaign. Marketers need a localized strategy at the beginning and move fast.
Test new technologies and innovations: mainstream mobile wallets provide standard offerings like coupons and loyalty cards. But when marketers invest in campaigns, they must take the initiative and work with wallet players to engage customers.
Use mobile wallets to enhance cross-border travel and shopping experiences: retailers, airports, hotels, restaurants, duty-free stores, and resorts already partner with Alipay and use mobile wallet features like red packets, location-based offerings, and real-time tax rebates to deepen their engagement with Chinese travelers. Marketers should leverage Alipay’s cross-border features to better engage Chinese travelers.
Xiaofeng Wang with Frederic Giron, Thomas Husson, Jacob Morgan, Diane Deng, and Bill Nagel