20 January 2019

No threat to Alibaba, Tencent mobile payment platforms, for now

As third-party mobile payment platforms become key in China’s e-commerce battlefield, almost every major internet player is aiming to get a foothold in the segment. Baidu and NetEase made their moves last year, setting the stage for more competition in the industry. But as of now, the two big players — Alibaba Group’s Alipay and Tencent Holdings’ (00700.HK) Weixin Payment — are in a comfortable position and are unlikely to see their cheese being moved in the near future. Here is why.

To start with, we know that once a person links his bank account with Alipay or Weixin Payment, he can use the platforms to shop online and pay bills. That is, however, just a part of the story.

Kang Ning, an internet finance expert who writes for technology website, has noted that Alipay and Weixin Payment have their own separate strengths. Alipay has an edge in terms of capital reserve, while Weixin Payment is mastering the third-party payment market in terms of volume.

Until now, the application of Alipay is for shopping on Alibaba’s e-commerce platforms— and The service is highly secure and is one of the reasons why it has attracted millions of users since its inception.

The transaction process is guaranteed by Alipay; it acts like a middleman and keeps a huge amount of cash between transactions. Alibaba then makes good use of those reserves. The group launched its wealth management service Yu’E Bao last June, helping users to earn some returns on their account balances.

With its intertwined relationships with Taobao and Tmall, Alipay is building up a closed-circuit system where users are totally dependent on it. But it also has its Achilles’ heel—the payment process can’t be simplified like what can be done by its rival.

With its over 500 million registered users, Weixin Payment links up a person’s bank account easily with the platform and the transaction process on Tencent is smooth and fast — which is what users seek when they pay through smartphones.

Alibaba and Tencent have their individual turfs in third-party payment solutions, and both of them cannot be easily dislodged by others. Other players offer limited channels for users to spend their money, which explains why new players like Baidu and NetEase are not able to expand their market share even though they provide higher yields on their wealth management products.

– Contact the writer at [email protected]


(First posted: 13:33)

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