As Mastercard, American Express, and Visa Inc gear up to enter the Chinese market for the first time, it seems their biggest competitor would come from a firm that does not issue credit cards.
Ant Financial already has a strong footing in the $27 trillion Chinese payments market. The company is owned by Jack Ma and it has been dominating the China payment market for years now. However, unlike Mastercard, Visa, and the likes, Ant Financial does not have its own credit card. Presently, the company is utilizing its Alipay mobile app to expand into consumer lending.
Rather than the conventional card issuance, Ant customers can easily get loans right from their smartphones with a few taps. Many Chinese mobile-savvy shoppers prefer this option because they don’t have a credit history but can generate good financial data through Alipay. Ant uses their financial data on Alipay to decide if they are capable of repaying their loans.
The impressive consumer loan figure has risen to $290 billion (about 2 trillion yuan). According to an analyst group, Goldman Sachs, the amount is likely going to double before the end of 2021.
President of Ant digital finance operations, Huang Hao, said consumer loan business has been increasing massively. He reiterated that there are still untapped opportunities in the market, which means that the level of growth could still increase beyond this present level.
Ant enters the short-term consumer loans market
As Ant is making waves in the short term consumer Chinese market, the U.S card companies may find it a lot more difficult to penetrate. It’s a bit harder to enter a new market let alone competing with an already established firm within the region.
Moreover, Chinese consumers may find it difficult to transfer from their beloved online loan processing system to a card loan processing system. As it stands, it seems the U.S card companies would have to come up with better strategies if they intend to make an impact in the market.
Young Chinese consumers prefer online loans over credit cards
As Ant and fellow competitors, TecentHoldings LTD intensifies their hold on app-based loan disbursement and spending, the Chinese consumers are already dropping their credit cards for what they perceive as a better option.
Recent research by Nielsen survey has shown that the young consumers of Chinese products and services prefer getting loans online than via credit cards. Young age here means people born from 1990.
According to the research, it’s far easier for them to get loans through online loan platforms than the rigorous stress of getting it through credit cards.
Credit card companies face a big task in China
The new credit card companies that intend to penetrate the Chinese market will be facing a big task of attracting the consumers with their products, according to Zennon Kapron, the MD of Kapronasia, a Singapore-based consulting firm.
He stated that the young folks in china are digitally inclined, and they feel doing business with their smartphones is the most convenient way for them. For the card companies, their biggest task is to convince them otherwise, or offer them something with better benefits, Zennon stated.
