Student number: 2308234

Module name & number: BMI 604

Topic: Do the pros of mobile payments such as Alipay and WeChat outweigh the cons
for consumers and businesses and how might these evolve in the future?

Tutor name: Jo Blackwell

Student number :2308234

Date of submission :2024/5/21

Word count :1582

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In recent years, the emergence of mobile payment services, such as Alipay and WeChat

Pay, has revolutionized how individuals conduct financial transactions, becoming an

integral part of the daily lives of millions of people worldwide. The emergence of these

platforms has been a game changer in the payments space, reshaping our lifestyles and

business practices. Chinese consumers can now seamlessly use mobile payment

platforms such as Alipay and WeChat - an innovation that has redefined the exchange

of goods, revolutionized consumer shopping behavior, and forced companies to reorient

their strategies. This innovation has redefined the exchange of goods, revolutionized

consumer shopping behavior, and forced companies to reorient their strategies. This

evolution has now made it easier for individuals to shop through digital means, thus

enabling businesses to attract more customers; however, despite the advances in secure

encryption on this platform, many still need to take heart about payment security issues

and personal privacy breaches. The assessment will focus on whether the advantages

of mobile payment systems (such as Alipay and WeChat Pay) outweigh the

disadvantages from both consumer and business perspectives. It will focus on

convenience, security, and technological adaptability while also anticipating the

challenges these platforms may encounter (Leong et al., 2022).

The first is convenience. The ease of use of mobile software has driven the widespread

adoption of mobile payments in China like never before in the industry: Alipay and

WeChat have revolutionized the management of everyday financial transactions by

simplifying them. However, this convenience must be critically assessed against

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historical payment innovations. In the 1950s, for example, Frank McNamara's

introduction of the Diners Club in an embarrassing case of forgetting his wallet marked

a significant shift from cash to credit card transactions. This innovation increased the

security of transactions and dramatically changed consumer behavior, as people no

longer needed to carry large amounts of money. In this sense, mobile payments have

evolved from such a foundation, offering greater flexibility and security (Leong et al.,

2022). However, the popularity of mobile payments has also brought about several

problems and challenges. According to government statistics, the number of mobile

phone-based telecommunication fraud cases in China has been increasing year by year,

involving vast amounts of money, due to the ease of transferring money by cell phone

or social media (China Academy of Information and Communications Research

[CAICR], 2023). At the same time, due to the high dependence on mobile payments on

technology, some technologically unskilled user groups (especially older people) are

excluded, further exacerbating the digital divide. In addition, mobile payment security

and data privacy protection issues are of great concern (IResearch Inc., 2023). In

particular, as cyber technology evolves, the risk of hacking and unauthorized data

breaches increases (Mordor Intelligence, 2023). WeChat Pay or Alipay have set up

specialized cybersecurity departments to enhance the security of their payment systems

by adopting state-of-the-art encryption technologies and strict security management

systems (Liu & Zhang, 2023). While these measures may improve payment security,

they may also increase the operating costs of the selling companies that interface with

these payment companies (Precious, 2023).

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The introduction of automated teller machines (ATMs) in 1967 quickly changed

people's payment habits. According to statistics, by 2024, the number of ATMs

worldwide will have exceeded 2 million, processing transactions amounting to trillions

of dollars annually, significantly improving payment efficiency and security. The

popularity of point-of-sale (POS) terminals has also further driven changes in payment

methods. Currently, more than 80% of the world's retail stores are equipped with POS

terminals, and these terminals process more than billions of transactions each year,

providing consumers with a more convenient payment experience. However, while

POS terminals have taken the world by storm, China has spawned a consumer system

based on WeChat and Alipay in the last decade due to the practical needs of more low-

cost stores and street stalls. With the help of WeChat or Alipay software, consumers can

use their cell phones to scan QR codes to make payments easily and quickly (Mordor

Intelligence, 2023). According to the latest data, the number of users of mobile payment

platforms such as Alipay and WeChat has exceeded 1 billion, with average daily

transaction amounts reaching hundreds of billions of RMB. This vast market size and

activity undoubtedly prove the success of such payment models in China's modern

payment system. At the same time, the transfer system based on WeChat and Alipay is

much less costly than the unusual POS or bank credit cards. In the case of e-commerce,

for example, all individually registered online stores in China do not need to pay any

administrative or transaction fees for WeChat or Alipay, which undoubtedly reduces

costs for both users and merchants and brings more vitality to the market compared to

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using bank cards and other means of conducting transactions (IResearch Inc., 2023). In

addition, mobile payments provide almost all merchants in China with consumer user

profiles that are only available to leading foreign companies. Since these online

payment companies have the biometric information of consumers, merchants can easily

understand the age composition of their users, which allows almost all merchants to

promote themselves by studying the composition of their consumers.

A well-known example is Taobao, an online shopping company owned by Alipay,

which spends an average of tens of billions of RMB per year to prevent the theft of user

information or the emergence of financial frauds similar to swiping and

telecommunication frauds (CAICR 2023). In addition, while static QR codes may be

sufficient for individual businesses to meet their cybersecurity needs, slightly larger

businesses, similar to supermarkets or online companies, must have a comprehensive

contingency plan in place for the damage or theft of mobile payment devices, so that

merchants have sufficient means to ensure that consumers can complete transactions

promptly and mitigate potential financial losses due to damaged devices ( Precious,

2023). Businesses need to consider several issues when introducing mobile payments.

Before customer acceptance, investment costs and other factors, such as purchasing

equipment, must be considered. Similarly, after customer acceptance, payment

platforms have to ensure that customer data is not misused because, without proper

protection mechanisms, personal information is exposed by customers through mobile

payment software. At the same time, businesses could use shopping for unethical

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analysis or resale, leading to cybersecurity threats, data breaches, and malicious fraud.

Liu and Zhang (2023) emphasize the importance of mobile payment systems and robust

cybersecurity protocols to protect sensitive customer information. Finally, due to

legal and regulatory requirements, some businesses, such as lounges/bars/internet cafes,

can only host consumers of any age or skill level. Mobile payment platforms likewise

need to ensure that they do not run afoul of local laws and regulations by critically

evaluating these factors to their advantage.

By comparing mobile payments, cash payments, and credit card payments, Lin argues

that mobile payments offer a means of payment that is safer than credit cards and more

convenient than cash payments. According to Tu, using credit card payments for online

shopping or offline insecure in-store transactions carries the risk of theft. In contrast,

cash transactions are anonymous and less susceptible to cyber threats, but less

convenient, and mobile payments offer the perfect solution. Mobile payments are the

ideal solution to both these problems as they use dynamic encryption to ensure greater

security than credit cards, and the user does not have to bear the hassle of carrying cash.

Modern businesses must carefully weigh transaction costs, encryption measures, and

consumer habits to determine which method best suits their operations and enhances

the overall payment experience for their customers (Tu et al., 2021).

Additionally, with the rapid advancement of technology, while businesses need to

allocate funds for future technological updates, these businesses should also consider

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other segments of the consumer population (Huang, 2023). While mobile payments are

widely favored by younger users, older consumers, especially seniors, may be more

wary of this emerging payment method due to the higher learning costs of smartphones

or a lack of understanding of the new technology, thus preferring traditional methods

such as cash and credit cards (NTT Data, 2022). Whether because of social justice or

for business success, companies should offer as many payment options as possible

when developing mobile payments to cater to different customer preferences.

In conclusion, mobile payment solutions, such as Alipay and WeChat Pay, have become

essential to contemporary existence. Provide users unparalleled convenience,

streamlining operations such as shopping, money transfers, and bill payments, making

them faster and more effortless (Mordor Intelligence, 2023). Mobile payments in

commercial settings decrease transaction expenses and improve operational

effectiveness (Panel, 2022). Additionally, they provide merchants with expanded

market prospects and valuable customer data, enabling them to understand client

requirements better and enhance their ability to meet them (Kim & Park, 2021).

Consider Alipay and WeChat Pay as examples, two widely adopted payment methods

that have become nearly universal in people's everyday lives (Mordor Intelligence,

2023). As previously stated, whereas mobile payments provide certain advantages, they

pose potential security and privacy threats (Liu & Zhang, 2023). With the progression

of technology and the reinforcement of regulations, government regulators are

intensifying their supervision of the mobile payments industry (Panel, 2022). They are

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creating various standards and regulations to govern mobile payment service providers'

conduct and safeguard consumers' rights and interests. Simultaneously, there is an

enhancement in consumer education, urging consumers to adopt a more prudent

approach toward utilizing mobile payment services. The concerns above are being

progressively resolved, and the benefits of mobile payment platforms continue to

surpass the drawbacks (Panel, 2022).

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References.

1. Ahmed, S., Hussain, N., & Hussain, Z. (2024). Mobile payment adoption in
developing countries: A comparative analysis of user perspectives. Journal of Global
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2. Caporal, J. (2024). Identity Theft and Credit card Fraud Statistics for 2024. The
Motley Fool
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statistics/(Accessed 21 May 2024)

3. China Academy of Information and Communications Research . (2023). White

Paper on Prevention and Governance of Telecom Network Fraud in the Information
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4. Hayashi, F. (2012). Mobile payments: What’s in it for consumers? Retrieved from

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9. Liu, F., Li, Y., & Li, Y. (2023). Mobile payment security: A comprehensive review
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16. Huang, X., (2023). Factors affecting mobile payment adoption: A systematic
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