Chinese Banks Starved for Data as Mobile Payments Rise

There’s a lot of value in mobile payments, starting with the obvious new levels of convenience and the ability to incorporate a rewards program, like we’ve seen done to great effect at Starbucks.

Even in this surfeit of benefits, there are also some unattractive parts of mobile payments. The Chinese banking system recently discovered one of these first hand: a sudden dearth of data for use in big data analysis projects.

Essentially, with the rise of third-party payment platforms like Alipay, Chinese banks are discovering that fewer people are turning to banks for payment processing.

Without that business, the banks not only lose out on potential commissions, but also on access to the data that tells banks—and potentially other firms—what customers are shopping for, what times of day the shopping is done, and so on.

That’s highly valuable data—data sufficiently valuable that some businesses will pay for it—and a loss of that data not only means a loss of insight for the bank itself to use, but also to resell.

So between losing out on merchant fees and big data fodder, the Chinese banking system is facing a serious problem with income. This isn’t a permanent problem—banks’ primary source of income is interest from loans—but it’s the kind of thing that could put a crimp in future growth patterns and potentially leave some opportunities off the table.

The alternative, of course, is to recognize that that which can’t be beaten should instead be joined. If banks want to get those merchant fees back, and access to that impressive data stream, then the way to do it is to put out a mobile payment product that customers want to use.

This shouldn’t be too great a challenge for the banks; they have more than enough in the way of resources, and have already seen plenty of first-movers learn valuable lessons about what customers want and don’t want.

Taking this into account, the banks now face a grim proposition: continue losing opportunities and data, or join the fray and take a chance on winning at least some of it back.

The mobile payments genie will not be readily put back in its bottle, so change is the only real key to success at this stage.