While mobile payments are beginning to take root in the United States and Europe, they have become the norm in China. So prevalent is cashless-ness in the Middle Kingdom that there are even places such as food courts that do not even accept cash as a form of payment. China’s $5 trillion in mobile payments dwarfs America’s $112 billion. While the US is still debating over various solutions like Apple Pay, Samsung Pay, Android Pay, or even PayPal’s Venmo, it seems that the Chinese have settled on two solutions: Alibaba’s AliPay, which holds 54% of the $5 trillion market, and Tencent’s WeChat, which holds 40%. Combined, both platforms carry much significance, with a combined market share of over 90%. Below are some of the advantages and disadvantages the two competing platforms have over one another.
AliPay, formed in 2004 by Hangzhou based e-commerce company Alibaba, has been in the business much longer than Tencent’s counterpart, having only been introduced nearly a decade later when WeChat began expanding its services beyond instant messaging and social networking. AliPay was originally launched as a supplementary service to Taobao to ensure trust between buyer and seller by only completing the transaction if and only if the buyer confirms the product is in good condition. After solving buyer to customer (B2C) trust issues, AliPay grew beyond Taobao and expanded beyond Alibaba’s ecosystem.
WeChat, on the other hand, launched WeChat Pay in 2013 to allow peer-to-peer (P2P) transfers and in-app purchases on public accounts. Like AliPay, the service expanded beyond its original parameters, with shops creating physical QR codes that accept WeChat Pay as a form of payment.
Despite being a newcomer to the mobile payment business, WeChat Pay has accrued 600 million users as of 2017, 250 million more than AliPay’s 450 million in the same year. However, AliPay has a bigger payment volume, $1.7 trillion to WeChat Pay’s $1.2 trillion and that has yet to include the $25 billion figure raised in 2017 during Alibaba’s Singles Day sales event hosted every November 11th. It should be important to note that despite being significantly newer than AliPay, WeChat’s increase in payment volume from 2010-2016 represented an 85-fold increase to AliPay’s 23.
That said, AliPay can rely on Alibaba’s e-commerce ecosystem. China’s biggest e-commerce sites Taobao and its retail equivalent, Tmall have AliPay as their default payment method. There is also the fact that Alibaba has major sales events like the aforementioned Singles Day event.
AliPay also seems to have an edge overseas, having an early-bird advantage over Tencent’s upstart in that area. AliPay is accepted in more than 120,000 brick-and-mortar stores across 26 countries while WeChat Pay is only accepted in 15 countries. AliPay has been able to secure deals with Starbucks in Malaysia, Verifone and First Data in the United States, and Ingenico in Europe, while WeChat Pay is playing catch up, establishing partnerships with CITCON in the US and RoyalPay in Australia.
WeChat Pay’s greatest domestic advantage, its seamless integration with its social networking tools, might prove to be its greatest international disadvantage. While AliPay can be used by suppliers who might not have even heard of Alibaba before, WeChat Pay requires the use of the WeChat app, social network and all. FOMO Pay says this might prove troublesome in countries with an already developed social network ecosystem, such as Facebook, LINE, Kakao, and Whatsapp. WeChat Pay is successful in China because of its near-universal adoption by the country, but that might not be the case for an international user who sees no reason to use WeChat if they already use another texting app or social network.
Alibaba, on the other hand, is content to participate in a diverse environment filled with different companies, products, and networks. While WeChat might be a direct competitor with Korean equivalent Kakao Talk, Alibaba invested $200 million in Kakao Pay to break into the Korean market. AliPay has also invested $500 million in Paytm in India, acquired a 20% stake in Ascend Money in Thailand, and took ownership of HelloPay in Singapore. An AliPay spokeswoman said that Alibaba sees AliPay is but one part of the globalization of Alibaba’s financial ecosystem.
Both platforms have brought about interesting innovations. WeChat introduced the hongbao feature for Chinese New Year in 2014, a gift giving service that invokes the tradition of exchanging packets of money during the holiday. The feature was such a significant part of WeChat Pay’s widespread adoption that AliPay introduced a hongbao feature of their own.
AliPay has tried to differentiate their hongbao feature by introducing campaigns such as the “Five Lucky Cards Collection” contest in 2015, which challenged its users to find five “lucky cards” before the end of New Year’s Eve for a chance to win $29 million in cash and coupons, split between participants. Alibaba has also introduced Augmented Reality (AR) technology into their hongbao service, allowing users to hide and collect hongbao in real locations by scanning objects with their smartphone cameras.
It is without question that AliPay and WeChat Pay are major players in shaping the future of cashless payments. Long-runner AliPay has gone from a secure payment platform for Alibaba to a convenient payment method for Alibaba’s subsidiaries and sales events. Tencent’s WeChat, while much younger, has caught up with a fast adoption rate and growing user base. While WeChat might literally give AliPay a run for its money at home, Tencent’s payment solution might have trouble breaking into markets with an already established social networking ecosystem, a reality that Alibaba not only accepts, but embraces.
While WeChat has gained an advantage by introducing a feature that invokes Chinese tradition, Alibaba has responded in kind by not only introducing a competing counterpart, but has also been exploring new technologies, such as AR and facial recognition. It is still uncertain which of these players will come out on top, but it is certain that they will continue to influence the future of mobile payments.