For many Canadian businesses, the coming of China’s Alipay is both a blessing and a curse.
The online payment platform is a boon because it allows businesses to cater to customers they might not otherwise have access to, such as Chinese tourists, students and other visitors, as well as online shoppers actually living in China.
But it’s also a problem because Alipay is just one of many new payment methods that businesses need to consider adopting if they want to attract or retain customers. For resource-strapped companies, keeping on top of the growing number of options can be an arduous task.
“Payments matter,” says Justin Ferrabee, chief operating officer of Payments Canada, the non-profit organization that facilitates more than $200-billion in daily transactions between banks, credit card providers and other financial companies.
“It didn’t used to be that way… but they matter in how you get customers, how you track your performance, how you go between online and in-store and everything else. Your business is impacted by the payment options that you have available.”
The payments industry in Canada – which encompasses a cross section of methods from credit and debit cards to cheques and mobile wallets such as Apple Pay – is worth about $16-billion a year, according to Payments Canada. The annual cost of processing all those exchanges is itself between $3-billion and $6.5-billion.
Those figures are relatively stable, Mr. Ferrabee says, but the number of payment methods that facilitate them is multiplying and fragmenting. Aside from the old tried-and-true methods of cash, card and cheque, newer mobile-oriented options such as Google Pay, PayPal, Square, Stripe, and, potentially soon, bitcoin and other cryptocurrencies are proliferating.
Many of these newcomers are also incorporating additional features beyond just handling monetary transactions, such as location-based marketing campaigns and loyalty programs.
Alipay is a good example. The platform, which was established by Chinese internet giant Alibaba Group in 2004 and is now run by the company’s Ant Financial affiliate, allows users to pay for goods and services online and in-store on their smartphones using scannable QR codes.
Merchants who accept Alipay, which has 600 million users in China, can offer coupons and other deals through the platform. A user in China who buys a flight to Vancouver, for example, can be notified of local deals upon landing and receive follow-up promotional messaging after returning home.
“It’s a whole-journey kind of service,” says Rita Liu, head of Alipay Canada. “It’s a payment-plus-marketing service to merchants in Canada.”
Alipay launched in Canada in 2017 ahead of this year’s official Year of Canada-China Tourism and says it now has more than 5,000 active merchants, including Holt Renfrew, Cadillac Fairview malls and the CN Tower.
With Chinese tourism booming, growing to 682,000 visitors last year, up 12 per cent from 2016 according to Destination Canada, adopting a payment method that many of those consumers are familiar with is a good way to get their business, Ms. Liu says.
“The experience they’ve had in China has formed a habit for them,” she says.
The challenges for Canadian businesses are as clear as the opportunities, though. Many are already overwhelmed when it comes to dealing with existing payment methods and are ill-prepared to add newer ones, especially emerging options that are not yet well-established.
In such situations, Payments Canada’s Mr. Ferrabee suggests bringing on an aggregator – a centralized service that can vet and integrate the various payment methods on a business’s behalf. Ottawa-based Shopify Inc. and Toronto-based Moneris are good examples, he says.
Shopify, for one, accommodates many of the more widely used mobile-wallet payment options including Apple Pay, Google Pay and PayPal, as well as several emerging methods such as Alipay, Britain-based Paysafe, France’s Bambora and Germany’s Giropay.
Many of these services are continually adding features, security updates and other changes, which create additional headaches for business owners.
“We don’t want the merchants to have to worry about all these payment methods,” says Andre Lyver, director of engineering at Shopify.
“Time spent figuring out which payment methods to offer their customers and negotiating commercial contracts and agreements with those providers is time taken away from running their business and trying to make sales.”
Many of the emerging payment methods also offer additional benefits to users and merchants – lower fees.
While credit cards generally incur a fee between 2- to 3-per-cent per transaction, many of the mobile services take less than 1 per cent.
“That’s a lot of money to save. If your customers are willing to use that technology, why not do it?” says Andreas Park, associate professor of finance at the University of Toronto. “For customers and merchants, this is a really good time.”