The rise of online payments through non-bank services, exemplified by Alipay and WeChat Pay – which falls under the Tenpay umbrella – in China, has caused another banking giant, Goldman Sachs, to stand up and take notice too.
The firm recently published a report, led by Mancy Sun, which reveals the value of third-party payments in China grew more than 74 times from 2010 to 2016, from US$155 billion to a staggering US$11.
Of that total, 56 per cent took the form of peer-to-peer transfers while about 16 per cent was consumption-related. Furthermore, payments made via third-party payment companies comprised 40 per cent of all retail sales, a figure that is still growing.
The user base in China of these applications is also mind-boggling. Goldman Sachs` report showed that there were 3.4 billion third-party payment accounts in China last year.
As of December, Tenpay managed around 600 million payment accounts. By March this year, Alipay had reached 520 million payment accounts. Both numbers dwarf the 197 million users Paypal has globally.
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The emergence of new electronic payment methods is undoubtedly reshaping consumer behaviour.
Li Yong, 23, a resident of Guangzhou, Guangdong, rarely carries cash with her nowadays. When it comes to commuting, she said major metro stations all feature machines which allow riders to top up their metrocards or purchase tickets with either Alipay or Tenpay. Or she can make use of dockless shared bikes if she does not want to take the metro.
"I only carry my wallet when I have to board a plane or a train because I need to show my IDs on those occasions," she said.
Li believes mobile online payment now accounts for the majority of urbanites` daily expenses, more than spending with credit cards and cash combined.
"There are QR codes for Alipay or Tenpay for expenses as small as one-yuan soymilk or a five-yuan chow-fun in a street-side breakfast place," she said. "You can find QR codes at snack stands, street vendors or places like H&M."
The growth rate of the online payment sector is showing no signs of abating. According to Chinese central bank data, online payments through non-bank services expanded 60 per cent in the first quarter to 47 billion transactions valued at 26.47 trillion yuan (US$3.9 trillion), 43 per cent more than last year.
And it`s not just online payments where the traditional banks are being left behind. They`re also losing ground to mobile trading platforms.
The second quarter of this year was a tough one for the trading desks of big Wall Street banks.
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