Chinese consumers have abandoned the acquisition of credit cards in paying for their acquired products and services due to Ant Financial's cardless payments method. The said trend had caused competitors such as Visa and MasterCard to see the service as their biggest threats as they start to enter into China.
According to Bloomberg, Visa Inc MasterCard Inc and American Express Co. are about to enter China's market for the first time this year. The report claimed that their entry is a cautious one as they see Ant Financial as its greatest competitor since it has created a trend of card-less payments across China.
The three entering companies were referred to as those who issue credit cards to its customer as a mode of payment for consumer purchases. However, it was highlighted that Ant Financial offers the same financial services to its clients but without requiring them to acquire credit cards to do so.
It was further discussed that Jack Ma's Ant Financial is already the strongest player in the payments market who has used AliPay, a mobile application that mounts a rapid expansion into consumer lending. The said service allows customers credit by merely tapping a borrowing option on their mobile phone.
The report claimed that the manner of acquiring loans had been popular in China's market especially among those who are referred to as mobile shoppers. They were said to be the ones who lack the financial capacity to acquire a formal credit but could generate financial data through AliPay. Moreover, the said app was assumed to have the capacity to make informed decisions as to whether the clients would default on their payments.
According to the president of Ant Financial's digital operations Huang Hao, the consumer loan business of the company has to become a growing trend at an accelerated rate, but the company still experiences challenges on how to engage untapped users. At present, Ant Financial wants to develop a more feasible and encompassing business strategy to expand its services, Huang added.
The report further indicated that Ant Financial's approach to short-term consumer loans has made it an incredibly strong challenger against the US card companies who plan on entering the Chinese market. The said companies were reported to be looking forward to growing their business in the long-term in China given that it is the second-largest economy of the world, reported Xinhua.
Managing director of consulting firm Kapronasia claimed that credit card companies who want to operate in China would have a hard time attracting its consumer base because Chinese millennial are digitally oriented. Thus, he explained that this was the reason why Ant Financial had been a growing trend in China's strongest consumer base demographic. He also added that these millennial use AliPay as their first platform of choice for loan payments and wealth management services.
