GUEST POST-WeChat Story Part 6: Getting Paid

The following is Part 6 in a multi-part series about the rise of WeChat, the popular mobile instant messaging service owned by Tencent.

By Lanie Nie

WeChat builds up payment capabilities

WeChat has played a key role in Tencent’s (HKEx: 700) recent efforts to build a “federal republic” on the mobile Internet. That interpretation comes from Cheng Lingfeng, a China tech reporter and former Tencent employee, describing Tencent’s strategy of selling stakes to close partners who promote WeChat Payment, a new service that allows users to link their bank cards to their WeChat accounts to facilitate online transaction payments. Such linkage gives WeChat users easy access to selected paid add-on services like shopping, mobile top up and taxi booking.

WeChat’s massive traffic volume has become a powerful selling point for Tencent in building new business relationships. Media speculated that access to WeChat was a major selling point when Tencent negotiated a strategic partnership with leading restaurant ratings site Dianping earlier this year. That followed a similar deal with Didi Dache, which was looking to integrate its taxi hailing service with the dominant messaging app.

A similar top-level access point promised for e-commerce giant (Nasdaq: JD) as part of its tie-up with Tencent earlier this year is said to be worth about $1 billion, as the integration will be more prominent. But Tencent President Martin Lau, said to be the brains behind these strategic tie-ups, made it clear that equity exchanges are not compulsory for partnerships with WeChat Payment, even though they could smooth communication.

In its bid to get mobile shopping and payment services going on WeChat, Tencent has used a number of gimmicks to entice users to link their cash accounts with the mobile service. Some examples include its awarding of cash rebates for users of Didi Dache, and a red envelop gimmick that let users engage in the traditional exchange of lucky money over the Chinese New Year. The latter spawned a craze among some 4.8 million WeChat users on the eve of this year’s Lunar New Year, and pushed up the number of registered WeChat Payment users by 5 times.

Though it started as a smartphone-only messaging app, WeChat and its related WeChat Payment service have increasingly taken aim at the space targeted by Alipay, a PayPal-like online payment system run by e-commerce leader Alibaba. Alipay controls almost half of China’s online transaction market, giving users a convenient way to pay for goods purchased on Alibaba’s popular Taobao and Tmall online marketplaces.

Alipay, which isn’t part of Alibaba’s proposed IPO, is also laying the groundwork for the company’s increasing attempts to enter the financial services market. Tenpay, Tencent’s older online payment system that is also backing WeChat Payment, was never able to threaten Alipay’s dominance until the rise of WeChat created a new battlefield. A war between Tencent and Alibaba has broken out ever since the rise of WeChat, whose increasing dominance in mobile social networking makes the service intimidating and potentially destabilizing for the e-commerce giant.

About 10 years ago, Taobao, Alibaba’s popular C2C online marketplace, decided to skip transaction fees and charge merchants that used its site for advertising instead, which soon helped the business overtake then-competitor eBay (Nasdaq: EBAY), which collects a fee on sales. But now, Taobao merchants, 80 percent of whom are reportedly not making money, have been grumbling about high prices for being prominently featured on the service’s home page or favored by its recommendation algorithms.

WeChat, with a mantra of setting up private, efficient and long-term connections between vendors and their customers, no doubt considers Taobao’s business model as invalid. When an increasing number of Taobao merchants opened up parallel stores on WeChat, Taobao blocked all the traffic brought by the chat app. Later in February, Alipay decided to cut off its service for WeChat vendors, which promoted the use of WeChat Payment to all certified service accounts starting March 4.

All this shows the war is just as much about mobile payment as it is about sales. As the world’s largest e-commerce market by sales and the biggest market for smartphones, China is on its way to carving out a dominant position in the so-called m-commerce, or purchases on mobile devices. Just as PayPal helped to usher in the PC-based e-commerce explosion, companies are now exploring how to facilitate mobile-driven transactions for shoppers and merchants. In China, the competition for that market is intensifying between Tencent and Alibaba, with WeChat Payment playing the offensive while Alipay finds itself in an unfamiliar defensive role.

Lanie Nie is a writer, translator and participant observer of localization and internationalization efforts by Chinese technology, media and entertainment companies. She freelances regularly for Chinese business and technology news websites and can be emailed directly at

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