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The Chinese Online Payment Platform Battle

How Tencent & Alibaba Are Locking Horns in 2018 

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Tech powerhouses Alibaba and Tencent have been locked in a competitive race to dominate China’s trillion-dollar mobile payment market. The contest has now reached a tipping point with signs that one side is starting to edge into a lead.

Tencent, who own the country’s most successful social media app WeChat has been steadily chipping away at Alibaba over the last three years. While its payment service is behind Alipay in terms of market share, analysts now say Tencent has more potential to capture China’s rapid e-payment growth, as electronic wallets on smart phones continue to take over bank cards as a favorite payment method for tech-savvy users.
 

The WeChat app has over one billion monthly users and by incorporating functions such as online shopping and e-payments into the app, the average user finds it easier to access.. Zhang Yu, an analyst at Beijing-based consultancy iResearch, estimates that 80% of WeChat’s users have tried its payment service -Ten Pay. In fact,Ten Pay now has more active users than Alipay’s 520 million.
 

Typically, Chinese consumers prefer to use WeChat on a regular basis, and the payment function within the app is much more common and is considered the 'norm' for people to use. This has led to Tencent’s rapid increase in market share. In the third quarter of 2017, China's mobile payment market grew 28% from a year ago to $4.7 trillion, with Alibaba having a 53% share. Ten Pay followed closely with its 40% market share, this is according to Beijing-based consultancy Analysys International. For a comparison, in early 2014, Alipay had 70% of this market.
 

According to a recent Forbes article, Alibaba and Ant Financial are spending heavily to claw back lost ground. Starting from December 2017, Alipay set aside as much as 1 billion yuan ($160 million) in fresh market promotions. But this may only get Alipay so far. With digital payment platforms now standard in big cities like Beijing and Shanghai, growth will now come from remoter areas and Tencent is managing to draw out new users there, so many analysts say.
 

But it isn’t all good news for Tencent. To grab users’ attention, the company has no choice but to match Alipay’s marketing spend. This, coupled with other larger investments in content and technology, weighs on Tencent’s margins. They only just issued a market warning that sent Tencent shares down as much as 4.8%.

All of this shows that there is still a lot of maturing, growth and expansion to come from both platforms and the battle isn’t over yet. But here at East West, we are excited by the fantastic speed this is playing out at and the potential for our clients to tap directly into the Chinese local consumer.

Tencents WeChat Payment App In Action from East West Agency Article
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