August, 2017

WeChat and Alipay square off overseas

Original article: The Wall Street Journal

China's two biggest mobile-payment platforms, Alipay and WeChat, are moving to capture market share overseas. The most obvious opportunity for them is to serve Chinese nationals overseas. 

Paul Schulte, founder of consultancy Schulte Research, told The Wall Street Journal that Alipay and WeChat "are following their tourists, and they are following their commerce. It’s like what happened in the 1950s when U.S. banks followed their corporate customers overseas." 

In 2015, Alipay and WeChat began expanding rapidly overseas. They are entering into partnerships with merchants in Southeast Asia and Europe and are eyeing investing in payment systems abroad. In December, Ant Financial (Alibaba's finance arm and the owner of Alipay) signed a deal with four European financial groups: in France BNP Paribas, in Great Britain Barclays, in Italy UniCredit and in Switzerland SIX Group. WeChat launched its payment services in Europe in July. 


It is natural for Alipay and WeChat to follow their customers overseas. Many Chinese people do not own credit cards and are accustomed to cashless payments using these platforms. The market is large and growing rapidly as well: A December report in The Financial Times noted that 120 million Chinese traveled abroad in 2015, up 18% over the previous year. 

Alipay is cooperating with a number of Western payment providers, including Ingenico, First Data, Worldpay and Verifone. It also has reached an agreement with Uber that allows its Chinese customers to pay for rides worldwide using Alipay. 

In emerging markets, Alipay has invested in India's e-payment and e-commerce brand Paytm, which has 150 million users as well as Thailand's Ascend Money, an e-commerce group with a presence in Indonesia, Cambodia, Myanmar, Vietnam and the Philippines. 

Alipay has good reason for aggressive global expansion: It is rapidly losing market share at home to WeChat. As WeChat becomes China's dominant app, with its own payment ecosystem, fewer Chinese consumers are using Alipay to pay for transactions online. Alipay has just 50% of China's mobile payments market now, compared to more than 80% in mid-2014. WeChat (to be precise, its parent company Tenpay) has been the main benefactor, with its share of that market rising to more than 40%. 

Emerging markets offer plenty of opportunities for both WeChat and Alipay, but they will need to be mindful of local tastes if they expect to be successful. WeChat's attempts to break into the messaging-app segment of Southeast Asia have largely failed, except in Malaysia and Myanmar. An app designed for the particularities of the China market - minimal foreign competition, heavy-handed censorship - has many limitations. 

Of course, censorship isn't an issue for payments per se, but the negative connotations associated with Chinese technology brands are not easily dispelled. After all, users concerned about their conversations on WeChat being viewed by Chinese state security may worry about the integrity of their payment information as well.