This Spring Festival Lin Ziyu, a 79-year-old grandmother, was introduced to the wonders of e-transactions. For the first time in her life, she sent a hongbao, the festive red envelope containing money that Chinese traditionally gift to friends and relatives during their new year celebrations, to her granddaughter Yu Xi electronically, using her son’s smartphone. 

"It is interesting," Lin said, describing her thoughts about the new approach to the traditional custom. "[Sending e-hongbaos] is not just for good luck, it creates a feeling of intimacy in the family. You get to see what the young people are playing with."  

New fad 

The traditional little red envelope has undergone a sea change. A host of cellphone apps are vying to offer a digital version. All the senders have to do is to tap the nifty little icon on their smartphones and in seconds the money is transferred far and wide. This new e-hongbao fad has caught on, expanding rapidly to small cities and rural areas from the big metros, and from the young to the elderly. 

Apart from sending out virtual gift envelopes, millions of people in China are today also using their cellphones to transfer money, pay restaurant checks and utility bills, order groceries and even operate their own mobile stores. 

Driving the digital transactions nationwide are the giant e-commerce companies, who are seeking a larger share of the online payment market, penetration into smaller cities, an expanded user age range and a restructuring of their social network, said Li Chao, a consultant with the iResearch Consulting Group, a market research and consulting company. 

With the rapid development of mobile Internet, Chinese tech giants like Tencent, the largest Internet service portal, and Alibaba, China’s biggest online commerce company, are digitalizing almost every daily activity they can think of and popularizing their mobile payment services like WeChat and Alipay.  

Paying without purse 

Yu Xi, 27, met a group of old friends for dinner after the new year holidays. They reserved two tables for 12 people at a restaurant. After dinner, she went to watch one of the latest movies, The Mermaid, buying the tickets online.She made the payment through Baidu Wallet, another third-party payment service launched by Internet search giant Baidu. "Paying [with a smartphone] is much more convenient. You don’t need to reach for your purse or worry about small change anymore," Yu said. 

According to the research firm Analysys, China’s third-party mobile payment market was valued at 16.36 trillion yuan ($2.5 trillion) in 2015, up 104.2 percent year on year. Alipay held 71.51 percent of the market in the third quarter last year while Tencent’s Tenpay had 16 percent. Alipay, Tencent’s WeChat and Baidu Wallet were the top three mobile wallets in the market. 

This February, Apple launched its mobile payment service Apple Pay in China, upping the already prevailing stiff competition. About a week later, in addition to 7-Eleven, the international chain of convenience stores, several retailers and fast-food restaurants started accepting the new payment service. They included Burger King, Pacific Coffee, Lane Crawford, KFC Beijing and Carrefour. Domestic group-buying sites, such as Meituan-Dianping, and private car rental companies including Yidao Yongche and China Auto Rental, which launched an online chauffeur service, are also accepting Apple Pay. 

A policy boost 

On March 5, 2015, while delivering the annual Government Work Report, Premier Li Keqiang broached the concept of Internet Plus - integrating the Internet and traditional industries through online platforms. Online payments could fill the gap in traditional financial services and improve the efficiency of their financial transactions. The government is promoting the concept to upgrade the economy.  

With more and more consumers taking to online payments, the next frontier for mobile wallets is to entrench themselves in offline businesses, said Chen Hu, a researcher with China’s E-Commerce Research Center.  

Li Chao agreed. "They [e-payment service providers] are hoping people’s enthusiasm about the e-hongbao will extend to mobile payments during other times as well," he said. 

Alibaba, Tencent and their ilk have been working to turn the interest in mobile payments into a deep-rooted habit. One strategy is to offer heavy discounts to persuade consumers to use their services. 

Thanks to the success of the venture, e-hongbaos are no longer limited to new year greetings. They are also a commercial marketing tool. 

According to Ouyang Rihui, a professor with the Institute of China Internet Economy at the Beijing-based Central University of Finance and Economics, mobile apps are strengthening e-payment service providers’ connection with customers through these virtual red envelopes, which will translate directly into greater domestic demand and consumption. 

However, Hong Tao, an economics professor at the Beijing Technology and Business University, has a caveat. "As the Internet industry is becoming increasingly diversified, online payment service providers need to improve their risk management to ensure the cyber envelope service develops smoothly, given that the market is still evolving," Hong cautioned.