In recent decades, China has become a global leader in financial technology thanks to its adoption of innovative solutions and the development of digital payment systems. Chinese giants like Alibaba and Tencent have become the main drivers of the development of mobile payments and digital wallets in the country.
Digital payments in China
In most developed countries, physical cash has been replaced by credit cards as the primary payment method, which in turn are being displaced by digital payments. One of the reasons the latter have been so successful in China is that credit card use has never become widespread in the country, making digital payments the most practical alternative to physical cash.
Today, China is the world leader in digital payments, a service used by approximately 88% of consumers. The use of this payment method is not limited to online purchases. Most physical stores in the country have a QR code that customers scan to make purchases, making transactions much faster and easier. Furthermore, digital payment platforms also allow for instant money transfers to other users, both within and outside the country.
Main payment applications
According to a Statista report, 92% of digital payment service users in China have used Alipay in the past 12 months, making it the most popular payment platform in the country. WeChat Pay comes in second with 85% user penetration, followed by UnionPay and JD Pay – with 45% and 23% respectively. Despite competition from international systems like Apple Pay, Chinese consumers prefer local services, which offer the advantage of greater integration into daily life.
Alipay
Alipay is an online payment platform launched in 2004 in China by the Alibaba Group, the international e-commerce giant, which can now also be integrated into payments in physical stores. The platform is not very different from other digital wallets and, like Apple Pay or Google Pay, requires linking one or more cards to make payments.
Globally, Alipay boasts over one billion users who benefit from more than 100 services integrated into the app, such as instant credit, installment payments, and cashback. The Alibaba Group is investing in online-offline integrations, focusing on new retail solutions available across Alibaba's various platforms (Alipay, Tmall-Taobao, Fliggy, Weibo), which streamline remote sales and click-and-collect transactions.
In 2024, Alipay incorporated the "Tap to Pay" option, an improved version of the QR code system that allows users to pay by bringing their mobile phone close to the seller's NFC tag —a device that allows the exchange of information wirelessly— without the need to scan a code or open the application.
WeChat Pay
WeChat Pay is the digital wallet connected to WeChat, the Chinese messaging app launched in 2011 by Tencent, which now boasts over one billion active users. The WeChat ecosystem offers its users a variety of services, including third-party options, thanks to its marketplace accessible to other companies that can develop dedicated applications.
WeChat Pay provides a user experience very similar to that of its competitor Alipay, with payments made via a QR code scanned by the customer or merchant. Today, it is one of the most popular platforms for mobile payments in stores, second only to Alipay, which remains the most widely used app for online and point-of-sale payments.
Beginnings of the FinTech sector in China
China is currently one of the world's largest FinTech markets. This is mainly due to the structural deficiencies of its traditional financial system—unable to meet the needs of a growing middle class—a booming economy, the high level of digital connectivity in society, and a favorable regulatory environment.
The lack of adequate financial services and a protective domestic environment in China in the early 2000s provided fertile ground for the growth of non-bank payment systems. To support its domestic players, the Chinese government delayed opening the financial sector to foreign companies. This, coupled with the absence of regulations on non-bank mobile payment systems, allowed companies like Alibaba and Tencent to grow exponentially. Simultaneously, the democratization of smartphones, access to mobile internet, and the increasing importance of e-commerce in retail further fueled the growth of the mobile payments sector. By 2010, China had surpassed 450 million internet users, 66% of whom were using mobile devices.
The involvement of the Chinese government
The Chinese government actively supports the development of the FinTech industry by introducing innovative financial solutions in government programs and promoting the creation of digital currencies and payment systems.
China was one of the first countries to launch its own digital currency—a Central Bank Digital Currency—the digital yuan, backed by the Chinese central bank and with the same value as the physical yuan. Its introduction has made financial transactions faster and easier, reducing the costs of interbank transfers, real-time payments, and donations.
In 2022, the Chinese government published an industry development plan—the FinTech Development Plan—to improve the sector's efficiency and foster its growth. To achieve this goal, the authorities have implemented measures such as strengthening the regulatory framework for FinTech companies, supporting the development of better national digital infrastructure, and promoting an innovation ecosystem.
On the other hand, the People's Bank of China has established a regulatory sandbox mechanism that allows financial technology companies to test their innovations in a controlled environment. This has been crucial in mitigating the risks associated with new financial products while simultaneously fostering creativity and technological advancement.
Beyond digital payments
Large digital payment platforms have become multipurpose applications, with functions such as credit card bill payments, bank account management, peer-to-peer transfers, prepaid mobile phone top-ups, bus and train ticket purchases, food orders, transport services, insurance selection, and storage of digital identification documents.
In this diversification process, Chinese FinTech giants have developed asset management platforms that offer both their own and third-party financial products, and even allow investment in certain companies. They have also begun offering microloans and loans of up to 12 months to individuals and small businesses, as well as health and life insurance.
Credit scoring is another of the most successful features they've incorporated. Based on data collected from the app's services—such as payment history and social interactions—a score is assigned to the user, which increases or decreases depending on their payment history. A higher score offers benefits such as a higher credit limit and preferential treatment when obtaining loans. In this way, the system functions as a loyalty program through rewards.
Differences with the European FinTech model
Unlike Chinese FinTech companies, which offer highly integrated services within a single platform and have digital payments at the core of their ecosystem, European companies follow a specialized model focused on specific services. In this model, payments are an extension of the banking system, and the preferred payment methods are credit cards and contactless mechanisms linked to bank accounts. The payment process requires more steps and interaction with different intermediaries—banks, apps, and payment gateways—which reduces efficiency but offers greater security guarantees.
In Europe, too, access to credit follows more regulated and traditional processes. Lenders rely more heavily on conventional credit histories, and credit is rarely integrated into non-financial applications. The result is a slower, but also more controlled, system.
On the other hand, Europe has opted for an open banking model, in which financial data can be shared among authorized entities. This fosters competition and decentralized innovation. China, in contrast, relies on closed ecosystems, where data is controlled by large technology platforms. This allows for much deeper integration of services, but reduces interoperability and concentrates power in the hands of a few players.
In China, FinTech development initially followed a “innovate first, regulate later” approach, which enabled very rapid expansion but also generated risks that have led to greater state intervention in recent years. In Europe, the approach has been the reverse: regulation has been established before or during the sector's development, with a strong emphasis on consumer protection and financial stability.
Conclusion
The rise of digital payments in China has rapidly transformed the financial habits of millions of people, placing companies like Alibaba and Tencent at the center of an ecosystem that goes far beyond transactions and encompasses credit, investment, and everyday services.
