The puzzles of Square Clones in China

By August 05, 2013
Keywords : Lakala, Square

Square, this mobile payment company, has been doing fine in USA, but the fate of these clones remains somehow odd in China. I just paid a visit to one of the most promising, quasi-Square payment companies called “Lakala”. On the surface everything looks great, but deep down there are pieces of puzzles I failed to grasp.

1)       In USA, Square’s card reader device is often promoted to small merchants, but Lakala tries to sell it to consumers in here. But do Chinese consumers really bother carrying this little gadget around. Remember unlike Americans who are often addicted to credit cards, Chinese prefer to pay cash for small transaction. Honestly in my daily life, I have not seen anyone surround me using Lakala…

2)       In USA, the card reader is free for small merchant, however Lakala charges RMB199 for consumers. Do we really care to buy it? Shouldn’t we want NFC mobile without this extra card reader in the end? By the way, Lakala described to me that “this little card reader device is the root of the business and root often does not change much”.

3)       In USA small merchants often use Square to accept credit card payment, but here, according to Lakala, consumers mainly use it to manage their credit card bill payment. In fact Lakala said its big trunk of revenue now is deriving from the service fee charges on every bill payment transaction. But why not using Alipay, China’s most pervasive third party payment for e-commerce? It does not ask me to pay RMB199 to buy extra card reader. It also allows its users to repay credit card bill without extra charge.

4)       Lakala said its card reader method is much safer than Alipay…I do not know…as a layman of IT, I cannot figure out its level of security.

5)       Lakala also produced its own Pos terminal and it is no different from the other Pos. By the way, POS business is heavily regulated by UnionPay. And veteran incumbents, especially those powered by UnionPay in this arena should have more advantage than Lakala.

6)       In addition, Lakala has installed its service oriented terminal devices in most convenience stores in major cities of China. Therefore even without Lakala card reader, you can go to the convenient stores and access these terminals to pay your bill of phone, electricity, water, credit card, buy movie ticket, lottery sth like that…But again Alipay also offers these functions, why should I go to convenience store to do this?

7)       And lastly and needless to say, America only has Square; but here clones are dancing around, and Lakala is just one of them. I do not know how this thing can work out and it is said in 2012 the loss of Lakala already amounted to RMB100 million (USD 13 million). Lakala said there is no need to worry about this. Again I do not know and just feel perplexed. Perhaps it can develop something fancy later on, but it might require a lot investment, I suppose.


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