When it comes to financial technology, China has Silicon Valley beat. WeChat is a big part of that.
What started as a messaging app in 2011 is now a mobile payments giant. “People use it for everything. For utilities, for gaming, obviously to communicate with their family and friends, and to do business,” said Yiren Lu, a software engineer (at Google) and a writer who covers WeChat and Chinese technology.
WeChat users can transfer money to their friends. But they can also pay for groceries, look through menus or place an order at a tea shop without standing in line or handling cash — or a credit card.
“There are hundreds of millions of Chinese people who were unbanked, who did not have bank accounts. It was a very cash-heavy society,” Lu said. WeChat and its main competitor, Alibaba’s AliPay, “basically became banks,” Lu added.
She chalks WeChat’s success — some 34% of China’s data traffic goes through the Tencent-owned app — to this quickly solved pain point, but also to the country’s rejection of American tech companies.
In 2009, “China basically kicked out all of the U.S. tech companies,” Lu said. China’s “Great Firewall” blocked Facebook, Google, Twitter and Vimeo that year.
If China offers a rapidly growing middle class — one with less “antipathy towards the idea of consumerism,” as Lu put it — it is Chinese companies that are getting to it first.
Here are a few highlights from the conversation, which have been lightly edited for clarity.
China’s fintech innovation comes from necessity.
“There are hundreds of millions of Chinese people who were unbanked, who did not have bank accounts. It was a very cash-heavy society. If you wanted to do business you would bring stacks of hundred renminbi notes, which is roughly $15. Obviously mobile payments presented a huge convenience and additional security. People talk about this leap-frogging phenomenon in Chinese tech where one of the reasons China has leaped ahead in a lot of these areas like mobile payments is because what they had wasn’t good enough like in the United States, where we already had credit cards. And the government basically took a very laissez-faire approach to this, which is also different. Because WeChat and Alibaba, which owns the other main mobile payment app in China (Alipay), they basically became banks. The government didn’t really require them to, for instance, have very high amounts of this money in reserves. That allowed the ecosystem to flourish.”
On WeChat, influencers have trumped display ads.
“Display advertising is not really a thing in WeChat — insofar as it is a thing, it’s for very specific kinds of brands. What’s much more common is this key opinion leader marketing. If you’re a brand, you’ll pay a key opinion leader to write about your brand. These are influencers. It’ll be a much more organic, integrated experience, frankly. In general, a lot of these people are very good writers and they can give a much more authentic sense of your product and make their audience feel like ‘I’m just a friend of yours, you happen to like my writing and my images, and I’m recommending this out of the good of my heart.’ That’s a very different kind of experience than encountering tons of display ads the way we would on Facebook or Instagram. I don’t know how much we’re going to move more towards that in the U.S. Given how expensive Facebook and Instagram have gotten, probably that will happen more and more. Influencer marketing is kind of the biggest thing in China.”
Shopping for shopping’s sake
“A lot of Chinese society is still very aspirational. A lot of what these influencers are selling are upper middle class, cosmopolitan, urban lifestyles. I’m not sure that there is as much antipathy towards the idea of consumerism. In America there’s almost this sense of ‘oh, I don’t want to be consumerist,’ and so you have to cloak a lot of these ads in influencer marketing or self-care. In China, that doesn’t really exist. It’s okay to just want to buy things.”