Swatch’s new Swatch Pay rollout in China will find it hard to attract new customers due to dominant pre-existing payment methods, high product pricing, and resistant behavioral habits.
Swatch, a Swiss watchmaking company, has recently rolled out the second generation of its Swatch Pay watches in China, advertising the watches as a new, more accessible method of mobile payment. The watchmaker has teamed up with China UnionPay (CUP) and 11 banks across major cities to enable contactless payment through cloud-based technology. Having UnionPay, the dominant Chinese card scheme, and some of the country’s largest banks behind the scheme will give this launch a strong foundation to build on, but it must compete in a saturated market.
There is an increasing trend of mobile payments gaining prominence in China, where 68% of 25–34 year old consumers in China – the main drivers of the consumer market – are ready to adopt mobile proximity payment products as soon as they are available. With payment cards only being used 8 times on average in 2016, m-payments, especially QR code-based services such as Alipay, are the main competition for Swatch.
It is unlikely that Swatch Pay will threaten any of the top companies providing m-payments in the country, as many customers still view their watches as a piece of jewelry or a functional accessory, rather than a method of payment. With the watch costing CNY580 ($86.27) compared to the minimal upfront costs of credit cards and electronic wallets, consumers are less likely to buy the watch for its payment features but more for its other functions.
Even other mobile payment initiatives have found it difficult to break into the Chinese market – Apple and Samsung introduced their wallets in 2016, both in alliance with CUP. Despite strong performance at launch, neither has been able to even remotely threaten the two leading payment services, Alibaba’s Alipay and Tencent-backed Tenpay, which between them hold just under 90% of the country’s m-payment market.
Apple Pay, Samsung Pay, and Swatch Pay all use NFC technology, which has limited acceptance in the country due to the dominance of QR code-based tools such as Alipay. As a result, the payment feature will be of limited use to the consumer, and hence Swatch will find it difficult to persuade merchants to invest in NFC-compatible terminals.
However, the company’s main strategy is that the product is a “watch first and foremost, with a simple function of payment added to it.” This means that should the product be successful in its own right as a watch, it may be able to gradually entice wearers to use its payments features and grow from there. Ultimately it is unlikely that consumers will switch from their current payment methods of either cash or existing m-payment schemes. However, loyal Swatch customers will be able to enjoy an additional feature of paying with their watch.
By Gitanjali Sharma, Payments Intern