HONG KONG: Three years ago cash was still king in China – until Alipay and WeChat Pay shook up the entire ecosystem.
Today, their dominance in mobile payments for everything from taxi fares to peer-to-peer transfers have not only made them household names in a country of 1.4 billion people, but incumbent payment operators are being forced to innovate or risk being left behind.
China has embraced mobile payments faster than any other country. Last year, mobile payment transactions hit US$5.5 trillion, making China the largest mobile payments market in the world, according to iResearch.
Tencent’s WeChat Pay, together with Ant Financial’s Alipay and its overseas strategic mobile payment partners, claim a total of 600 million and 800 million users respectively.
Combined, they account for over 66% of the third party payments market in China, based on research by Analysys International.
But not satisfied with just dominating the Chinese mainland, both companies have started laying the groundwork to introduce their services to other Asian markets like Hong Kong and Singapore.
“Tencent and Ant Financial are biting at the heels of incumbent payment operators,” said Michael Yeo, research manager for financial and retail insights at IDC.
China’s monopoly bank card services provider China UnionPay has sat up and taken notice. With only a 17% market share in third-party payments, it has just launched an integrated mobile payments service as it looks to compete head to head with Alipay and WeChat Pay.
Alipay and WeChat Pay have also made their presence felt abroad. Both companies extended their payments services to hundreds of thousands of merchants in regions like South-East Asia and Europe, targeting outbound Chinese travellers and encouraging them to settle their overseas shopping bills with the apps.
In the past year, both companies have also focused on rolling out local e-wallet services to other Asia Pacific markets. These apps can be linked to users’ bank accounts or topped up manually.
In Hong Kong, Tencent launched its WeChat Wallet feature in January 2016, allowing users to link their credit cards to the wallet, send digital red packets to family and friends, and purchase tickets for local attractions and travel insurance.
In a similar move, Ant Financial, the financial arm of Alibaba Group, pushed out a separate, local version of its wallet called AlipayHK for Hong Kong residents in May. Both companies have moved quickly in an effort to encourage consumer adoption. Last month, both Alipay and WeChat Pay rolled out mobile payment services for Hong Kong taxis, an industry that has long been dominated by cash, introducing a host of incentives including no administration fees to encourage taxi drivers to adopt the system. Within a month, some 2,500 taxis out of the city’s fleet of 40,000 signed up.
Now WeChat Pay and Alipay have set their sights on the city’s MTR subway system, with new partnerships announced in late November that would enable travellers to pay for train tickets with mobile payment wallets at selected MTR stations..
Elsewhere in Asia, payment operators are also scrambling to launch mobile services to fend off competition from Alipay and WeChat Pay.
In Singapore, the two Chinese operators are already working with merchants and local third-party payments providers to let Chinese tourists pay with Alipay or WeChat Pay. In August, local media reports said Ant Financial was still “looking for partners” to potentially launch its wallet service in Singapore.
Wang Xiaofeng, senior analyst at Forrester Research said that while local payment operators are moving to innovate and roll out their own services, it could be difficult to compete with Alipay and WeChat Pay.
“If Alipay and WeChat Pay get licences from regulators and roll out localised versions, they’re going to be a huge threat,” she said. “It’s going to be difficult to compete with them, because they are already so experienced, be it in the technology side or the go-to market strategy in encouraging adoption.
“The biggest difference between tech companies and payments incumbents is speed. When services like WeChat Pay or Alipay enter a market, they move very, very fast. Traditional payments operators or banks just simply do not have the same agility.” — South China Morning Post