Earlier this month I wrote about the changing face of Retail Banking and the risks introduced by new competitors using technology to better serve banking consumers. This week in China we saw a vivid example of this change centered around the gift giving tradition of hongbao – the exchange of “lucky money” via red envelopes for Chinese New Year.
For centuries, hongbao has been a complex cultural tradition where married people, elders or employers gift money to single people, children or employees in red envelopes, because the color is considered lucky. Just a few years ago, this tradition meant a trip to the bank to get coins and small notes to stuff your envelopes in advance of the Chinese New Year.
Now, with the advent of mobile payments and the proliferation of smartphones, the line between social networking and banking payments has blurred resulting in an avalanche of “virtual” red envelope gifts. The growth has been phenomenal. Global Times of China reported that in the 24 hours of the Lunar New Year, the three largest internet properties in China completed nearly 1.35 billion hongbao transactions – 1.01 billion for WeChat, 240 million for AliPay, and 101 million for Sina Weibo. That 1.01 billion transactions on WeChat compares to just 20 million transactions a year ago, an increase of 5000% year over year.
Like Paypal did with web payments a decade ago, and Apple Pay is beginning to do with point of sale purchases, the extreme speed with which China has become comfortable with micropayments through non-traditional banking channels should be giving bank executives the world over a case of the cold sweats.