Tencent is starting to grab up marketshare from hitherto dominant force Alibaba and its associated Alipay service. The Chinese mobile payments market is worth an estimated $5.5 trillion annually.
Alipay is still the majority player with its PayPal-esque service, with 54 percent marketshare as of Q4 2016. That is not a small number, but it does represent a sharp decline when one considers that in Q3 2015 Alibaba represented 71 percent of the market.
Tencent’s share rose to 37 percent from 16 percent in the same time period.
Tencent’s biggest contributions to the mobile payments market come through its gaming and social media platform WeChat and its associated 890 million users. Weixin Pay — Tencent’s payment contribution — first made its mark with digital hongbao, the red envelopes of money handed over as gifts during lunar new year.
“If we don’t consider red envelopes and [Alibaba] don’t count Taobao transactions, we don’t know which one is bigger,” Zhang Ying, Tencent vice-president, told a conference in Hong Kong last month.
The profit from the payments enterprises pales in comparison to the value of the data on consumer financial habits and spending.
“The dominance of the Taobao and T-Mall eCommerce platforms initially helped make Alipay the default digital wallet in China,” said Jeff Galvin, partner at McKinsey in Hong Kong. “But now, as Chinese spend more and more time in the WeChat ecosystem — and they keep funds in its wallet for peer-to-peer payments, in-app purchases, and other things — [Weixin Pay] has really emerged as a peer competitor to Alipay.”
And Tencent has moved apace into the physical world, signing a big deal with Starbucks this year to make it an instore payment method (with the exception of the one on the Alibaba campus for some reason.)
“Tenpay has a clear path,” said Mr Zhang. “In 2014 we focused on hongbao. Last year we tried to develop the offline merchants. This year my objective is to cover more than 10m small merchants or stores in China.”