It seems like Covid speeded up the digitalization we all needed, especially in Asia. When lockdowns started, many ordinary activities such as going to restaurants and cinemas were off-limits. While the economic outlook didn’t look great for many businesses, this meant a surge in e-commerce (online shopping, etc.), and online education. We experienced how much technology changed our lives in 2021 and helped us, but Asia took it to a whole other level to prevent further contagion.
Digital technology entirely changed the Chinese economy since it serves as a macroeconomic stabilizer in these uncertain times. Even if you have to go outside to the farmers market, you will see QR codes to scan it and pay instantly via WeChat Pay (this was available even pre-covid. Alipay does the same, so the two are the main competitors in Asia.
Ahead of everyone
Digitalization technically started with Taobao, a Chinese version of Alibaba (e-commerce platform), back in 2003. Remember, back in 2003, we didn’t have smartphones, so e-commerce didn’t “explode” until 2013 when smartphones were finally introduced, making it easier to browse. Just a click away, without having to wait for your computer to turn on while working using 2G wi-fi. Alipay is an offspring of Alibaba since they had to develop an online payment plan that everyone could trust. Alipay started in 2004, and now it has around 1.4 billion users.
The importance of WeChat
WeChat is a social media China, and its people use it worldwide to connect, and it also has its payment system – WeChat Pay, where you can also make a transaction with another party. Funnily enough, it attracted many customers in 2013 by having electronic red envelopes, typical for Chinese New Year. WeChat has over 1.2 billion active users now.
Every payment is digital
If you were ever in China, you couldn’t miss the obvious – almost nobody has cash. It’s hard to pay in cash. Everyone uses their phone for payments, and it’s entirely normal for a while now. Mobile payment is the most successful tech China ever produced (by now). It is hard to imagine what would happen if it wasn’t there when COVID hit. With mobile (online) payments, you can book hotels, order food, by simple things while passing by and so on. It has become an ecosystem created by Alipay and WeChat Pay. Some studies show whenever farmers start using this type of service, their income rises, and job opportunities are much bigger.
Ant and Tencent are companies managed by Alibaba and creators of WeChat (the latter). They started to provide credit for the masses by developing a biotech credit risk management system. It sits on two main things: big platforms and risk assessment based on data credit.
Importance of Taobao and WeChat
Taobao/Alipay and WeChat/WeChat Pay are important in three ways:
- They help acquire large numbers of customers (with low fees)
- They collect customers’ digital footprints and use them for real-time monitoring (the same way as algorithms work), but they use them to form a realistic input for credit risk analysis.
- They help with managing repayment.
The combination of big tech platforms and big data credit risk assessment enables big tech companies to grant credit to a number of individuals and small and medium-sized enterprises, most of which have never borrowed from a bank. Affiliates, such as MYbank, have a business model called “3-1-0”. It means you need less than three minutes to apply (online of course), and if your application is approved, your money will be transferred to your account instantly. If you were curious about how Chinese lenders grant around 10 million loans yearly, it is thanks to digitalization and making it work.
It has just started
China is ahead of many countries digitally, but how will it develop further? The Chinese economy is focused on efficiency and reducing costs, where AI will be of great help. When robots start to replace humans to ease the work-shortage problem, how far will it go, and will it backlash into layoffs without proper replacement?