Compared to the U.S. mobile payments market, China is light years ahead, particularly when it comes to getting consumers on board with actually using mobile payments.
That’s something the U.S. market hasn’t quite found the recipe for. Now, however, it appears the battle between China’s dominating mobile payments companies is getting even closer than before as other major companies look to partner to help push the mobile payments envelope.
Alibaba-backed Alipay, which is part of Ant Financial, has had the stronghold over the market, with its more than 450 million users. Now, however, Tencent (762 million users) is continuing to make a name for itself as its WeChat social messaging app with payments capabilities gains steam among consumers. And the companies are working even harder to gain market share before major companies like Apple, Samsung and Google attempt to get a piece of the mobile payments pie.
And it’s pretty obvious why.
Data from Euromonitor International, as provided by The Wall Street Journal, shows that mobile transactions in China hit $235 billion last year, which was more than double the year prior. The U.S. market is also seeing strong growth — a 42 percent increase — to $231 billion.
But the U.S. market has been playing catch up for the past few years. When looking at the data for 2010-2012, while China was gaining steam on the mobile payments front, the U.S. market was practically nothing. The U.S. has since nearly caught up to China’s market value.
While Alipay still has a dominating presence in the marketplace, the data show that Tencent is gaining more of the market every year. This comes at a time when Tencent is investing heavily on providing its users discounts and deals with on-demand services.
Tencent’s mobile payments share grew from 11 percent to 20 percent in 2015, while Alipay’s share dropped to 68 percent from its 82 percent. But Tencent still struggles from being able to monetize the service. Ant Financial doesn’t disclose that aspect of its business.
“Overall, we look at payments as a business that may generate more revenue, but we continue to invest in it,” Tencent President Marin Lau told analysts during the company’s earnings call last month.
On Alibaba’s side, one major move it just took was to pair up with Samsung to make it easier for Samsung users to pay with Alipay. Ant Financial has also secured deals with companies like Ele.me, a food delivery app maker to get integrated into those on-demand service options.
To keep up with Alipay, Tencent has been working to expand WeChat’s footprint outside of China, including getting more presence as a payment option online and in stores. But for now, it’s still focusing on playing catch up.
“We are the underdog, but we are starting to catch up,” a Tencent manager told WSJ.