When it comes to digital payments and commerce, it’s hard to argue with China’s leading and influential position, especially in terms of ecosystems based around consumers’ mobile devices. As well, a big part of the future of the global sharing economy is playing out in China, and that’s worthy of note.
Among the latest developments on that front concerns a pullback. About a month ago, China-based bike-sharing company Mobike, which once attracted billions from big-name investors, said it is closing down all of its operations around the world, to focus solely on China. The company was purchased by Meituan for $2.7 billion less than a year ago, and before that it raised $900 million from investors like Tencent and Foxconn. The company, however, couldn’t find a sustainable business model.
The company has struggled recently, but so have most bike sharing startups in China, though Mobike was probably the most successful. When Meituan first bought Mobike, things looked better. Competitor Ofo was suffering financially and had to pull out of operations overseas. But Meituan also started to pull back on its mobility sectors, instead choosing to focus on food delivery and hotel booking. Also, competitor Hellobike, backed by Alibaba, entered the picture.
Sharing Economy Signals
Still, most signals seem to be positive when it comes to future prospects for the sharing economy in China. One recent report forecasts an annual growth rate of 30 percent or more over the next three years for China’s sharing economy, “thanks to the public’s active participation, government’s policy support and mature business mode.” The report added in 2018, the numbers of consumers taking part in the country’s sharing economy increased 7.1 percent compared with 2017.
That said, investment in the country’s sharing economy declined about 23 percent year over year, a trend blamed on “fierce competition in the ride-sharing sector.”
Another report, this one from Mintel, found that about 70 percent of Chinese urban consumers are open to using products and services via the sharing economy — about 30 percent of them, by contrast, all but insist on using brand-new products and services, suggesting they are not open to “sharing” retail activities.
Bicycles are among the top sharing products, with 91 percent of those open to such products and services saying they had rented or bought second-hand manual or electric bicycles. For cars, it was 61 percent. Books and consumer electronics were far behind transportation when it came to a willingness to take part in the sharing economy, at about 25 percent for both product categories.
That said, some 59 percent of those Chinese urban consumers cite “affordability” as a motivation to take part in the sharing economy — underscoring the potential for its growth as consumers seek out new products they otherwise would not have access to. As well, 51 percent cited environmental and sustainability concerns as reasons for the attractiveness of the sharing economy.
That report also hit upon an increasingly important issue in the sharing economy, no matter the country: trust in the system — specifically, trust in sellers and trading platforms. Some 57 percent of those Chinese consumers said there are not enough background checks regarding the trading platforms involved in the sharing economy.
As PYMNTS has found through research and interviews, payments promise to play a major role in building that trust and ensuring the growth of “shared” products and services — the global sharing economy is projected to reach $335 billion by 2025. For platform payment providers, that means handling payments in a way that takes in massive amounts of data without friction, and, in some cases, providing robust cash flow to suppliers to give the platform a competitive edge. That also means using data, algorithms and machine learning to ensure that both buyers and sellers are who they say they are, and that they deliver on their promises.
Taking such steps will go a long way toward ensuring more sharing economy growth in China and elsewhere.