When it comes to mobile payments in China, the QR code is king. Alipay, one of the giants of the mobile payment sector, is attempting to change that with Tap!, a new contactless payment function. Yet, six months after its launch, the jury is still out on whether shoppers and merchants will make the switch.

As opposed to having to scan a code, Tap! uses near-field communication (NFC) technology, allowing shoppers to pay at checkouts simply by placing their phone close to a specially installed reader. Such technology is common in many overseas markets, yet attempts in the past to introduce this and other alternative payment options in China — such as face-recognition systems and UnionPay’s QuickPass — have largely been unsuccessful.

Nothing has come close to challenging the dominance of QR codes, which are used for 93% of mobile payments nationwide, according to a 2023 report by the Payment & Clearing Association of China.

To disrupt the status quo, Alipay has embarked on aggressive online and offline promotional campaigns since introducing Tap! in July, providing tech support and subsidies to stores as well as major discounts to consumers.

Alipay’s parent company, Ant Group, said in early November that Tap! was already available in more than 1,000 shopping malls and other commercial centers in over 50 cities. Business news outlet Late Post also reported that a team of at least 1,000 people had been hired to install 1 million terminal devices in under half a year.

Zhang Zhan, a member of Alipay’s outreach team, told Sixth Tone that the company not only provides NFC sensors to merchants but also subsidies of up to 1 yuan ($0.14) per transaction to cashiers who help promote the service, with a daily cap of 300 yuan.

Shanghai has been one of the first cities to adopt Tap!. Shan Luhui, who runs a community grocery store in the city’s outskirts, was intrigued when she was approached by a member of Alipay’s marketing team, and agreed to install the system. Now, checkout times are faster, “and my customers are happy because the platform is giving out random discounts to attract new users,” she said.

However, a significant drawback is the time it takes to withdraw money from the system. With QR code payments, the cash is instantly transferred to her account after each transaction, but with Tap!, Shan needs to wait overnight. “This puts significant pressure on cash flow, as I need high liquidity in order to purchase products and pay my rent,” she said, adding that if the issue isn’t resolved quickly, she might decide to remove the system.

For customers, convenience, reliability, and security are the chief concerns when making the switch from QR codes.

Zhu Yu, a 27-year-old lawyer, recently tried Tap! for the first time in a Shanghai store after being prompted by the cashier. She was impressed with the system’s simplicity, and the fact it waived the 84 yuan ($12) she’d spent on groceries, a perk for first-time users. Yet, she was also hesitant, as the system “allows password-free payments, which makes me worry about fraud and personal data leakage.”

To prevent fraud, a phone must be unlocked to complete a transaction using the Tap! function, indicating it’s in the hands of an authorized user. And only shoppers who allow password-free payments for small amounts can “tap and go” at the checkout. If not, they will need to approve transactions manually.

Liu Yuanju, a researcher at the Shanghai Institute of Finance and Law, told Sixth Tone that NFC technology is more secure than QR codes. For example, he says people maliciously swapping out QR codes to commit fraud has long been a major headache for merchants, but the data shared via NFC is encrypted, so the technical requirements and investment required to steal money are far higher.

Potential upgrade

Debates over the pros and cons of QR codes and NFC technology have raged in China since the emergence of mobile payments. The combination of limited credit card usage, the rise of mobile internet, and the integrated business models of tech companies created the ideal conditions for the widespread success of QR code payments as an affordable and accessible solution for both consumers and merchants over the past decade.

According to Ant Group, although perceived as an NFC-powered service, Tap! is more of a variation on QR code transactions, as the function transforms a smartphone into an NFC tag reader, with the online transaction completed via the app. This differs from established NFC payments such as Apple Pay and Samsung Pay, which function as card emulators, with the customer’s bank card details stored directly in their phone’s NFC chip.

One reason the company chose the tag reader route rather than card emulation is to support iOS devices, as the card emulation mode on iPhones is exclusive to Apple Pay. However, while users of Android phones can tap and go, customers with iPhones still need to confirm their transactions in the Alipay app.

Liu said that a major obstacle to NFC technology in China used to be the low penetration of NFC-enabled phones. Yet, reports suggest more than 80% of smartphones in China now support NFC hardware, paving the way for new, user-friendly payment solutions, potentially leading to market expansion.

Rather than serving as rivals, he ultimately expects NFC and QR codes to complement each other. “When paying at the exit of a parking lot, for example, QR codes are more convenient because they can be scanned from a distance, whereas NFC only works when the phone is close enough to a terminal,” Liu adds. “But it will still take time for people to upgrade their phones, as many older models don’t support NFC.”

Additional reporting: Li Miaoran; editor: Hao Qibao.

(Header image: Alipay Tap! devices at local stores in Shanghai, Aug. 21, 2024. VCG)