Alipay pushes closer to card networks' turf in U.S., U.K., Canada

China’s Golden Week started on Monday and with it, global cities and merchants are boldly promoting Alipay in an effort to capture Chinese tourist dollars. At the same time, merchants are building out a competitive acceptance network that could someday rival the major payment card networks.

Golden Week in China is a semi-annual consumer holiday. The first Golden Week coincides with the Chinese new year, which begins in January or February. The second Golden Week starts October 1st with China’s national day, which celebrates the formation of the People’s Republic. For the current holiday, approximately 700 million Chinese consumers are expected to travel domestically and overseas.

In the U.S. and other markets, merchants and acquirers have quickly and loudly rolled out the welcome mat for Alipay and its rival, WeChat Pay, to encourage Chinese tourists to spend money in their shops. Across the globe, Chinese tourists are making themselves well-known for their heavy spending habits, which tends to dwarf monies spent by other tourist groups. Since Chinese citizens are restricted by their government in terms of how much cash they can travel with, encouraging the use of Alipay and other mobile payment tools is a way for merchants to help the tourists get around this restriction.

Qilai Shen/Bloomberg

Ronald Palmer, head of Europe, Middle East and Africa at Alipay, told the U.K. publication the Evening Standard: “We’ve signed up thousands of merchants — in the last 6 months, we’ve seen a 60% growth in the UK — activating most of Chinatown’s stores, supermarkets and restaurants, plus the London Eye, Sealife and other Merlin Entertainment venues. Alipay is enabling the surging numbers of Chinese consumers who are now travelling abroad to spend their money in UK stores.”

The city of Toronto launched its monthlong advertising campaign at the end of September, which includes a Golden Week celebration, targeting Chinese tourists. The campaign is being conducted in collaboration with Alipay and payments integrator OTT Pay. The purpose of the campaign is to promote Alipay merchant acceptance in the city and encourage Chinese visitors to use the mobile app for purchases. China is Toronto’s largest overseas market of foreign tourists.

Other recent promotions to highlight foreign merchant acceptance include Alipay’s “Cashless” vacation trip to Singapore in which six Chinese tourists were invited on a trip to the island nation to showcase the ability of a consumer to travel without using any cash, only relying on the ability to use Alipay.

By using Chinese tourist dollars as a lure, Alipay is quietly building a global acceptance network to rival Visa and Mastercard. Deals with First Data and Freedom Pay give the company a growing merchant acceptance base in the U.S. Favorable interchange may also be a factor in this growing merchant acceptance. While no interchange details are available on the U.S. market, in its home market of China, the rates it charges are literally, jaw-dropping.

“The average transaction fee is 10 basis points and cross-border is 60 basis points,” said Amitaabh Malhotra, chief executive officer of Omnyway, at Sourcemedia’s PayThink conference last week.

In fairness, Alipay and its rival, WeChat Pay, built an acceptance network in China where there was none, so favorable interchange in those markets should be expected, compared to more established markets such as the U.K., Canada and the U.S.

In building the acceptance network in China, both Alipay and WeChat Pay have built their own ecosystems. “It comes down to the fact that these are ecosystems supported by the companies. Most places didn’t take plastic [cards],” said Sarabjit “Ruby” Walia, executive vice president, head of digital retail banking and wealth management at HSBC, at Sourcemedia’s PayThink conference.

While Alipay is still a network geared toward Chinese consumers, as its acceptance grows across the world, it could easily adopt a new strategy to offer domestic mobile payments in the U.S., U.K. and other markets, catching many legacy card issuers off-guard.