Bundled into the story of the growing power of Chinese consumers is the story of enabling them to spend their money more easily. China Economic Review and Ipsos Marketing cooperated to design and implement a survey examining the current state of consumer payment methods in China.
The full survey (which can be downloaded online from chinaeconomicreview.com) was conducted over the summer of 2011 in six Chinese cities: Beijing, Shanghai, Guangzhou, Wuhan, Chengdu and Shenyang. There were 602 respondents, approximately 100 from each city. The respondent set was composed of men and women between 25 and 45 years old; this cohort represents the primary holders and users of bank cards (including credit cards and debit cards) in China today.
The envelope, please
There were few significant regional or gender-based differences in the number of credit/debit cards respondents held or what the cards were used for, but age did matter – respondents between 31 and 35 years old tend to hold more cards than other segments of the cohort.
As far as survey respondents were concerned, the most popular domestic card issuers are Industrial & Commercial Bank of China, China Merchants Bank and China Construction Bank, in that order. The leading foreign provider by a wide margin is HSBC, followed distantly by Citibank and Standard Chartered.
The most common network used was, of course, UnionPay, the state-owned payment network monopoly that controls the local market and is also reaching out overseas, in particular to developing markets in Asia. More than 60% of the cards owned by survey respondents were UnionPay cards; another 19% were “UnionPay Visa” cards, a joint venture product that allows cardholders to use Visa’s network when conducting transactions overseas.
Interestingly, the majority of credit card holders (59%) also have some form of consumer financing, with the percentage reaching 70% in Beijing and Guangzhou. Consumer financing was mostly used for automobile and computer purchases – apparently once Chinese consumers get a taste for the power of leverage, they want more. Respondents identified the automobile financing sector as one undergoing particularly rapid growth. Most automobiles cost more than the average Chinese credit card limit, and offering finance facilities has become an easy way for manufacturers to encourage consumers to choose one brand over another.
The survey also shows that traditional payment systems like Visa, Mastercard and the domestic monopoly UnionPay continue to lag behind “upstart” escrow-payment system AliPay when it comes to online purchases (although it should be noted that AliPay itself accepts credit and debit cards). But mobile payment’s popularity appears to be on the wane.
In UnionPay’s case, it has only itself to blame for the popularity of payment alternatives. More than one-third of respondents reported having trouble using the UnionPay network for transactions, and system failures have gained widespread attention in domestic media – they seem to occur mostly during holidays when Chinese shoppers most need to get at their cash.
This year the system had an outage at the beginning of September’s Mid-Autumn Festival, during which no point-of-sale payments could be processed or cash withdrawn for nearly a day in some cities. The downside of being a monopoly is that everything is your fault; UnionPay may be unpopular, but there is no alternative.