18 March 2019
Tencent chief Pony Ma has a mild, calculated approach to regulatory issues concerning third-party online payment services. Photo: Bloomberg
Tencent chief Pony Ma has a mild, calculated approach to regulatory issues concerning third-party online payment services. Photo: Bloomberg

Alipay and Tenpay: Two peas in a pod, nothing more

By all appearances, Alibaba founder Jack Ma and his Tencent (00700.HK) rival, Pony Ma, are aligned in at least one aspect of their sprawling businesses. Both are on one side of a battle over third-party online payment services against China’s giant state-owned lenders and regulators on the other.

It has not been particularly pleasant for Jack Ma, whose high profile has magnified his own challenges. And by being too outspoken about his distaste for the source of his problems, he is probably courting more trouble than he cares to handle.

“Sometimes what defeats you is not new technologies but a piece of government decree,” Jack Ma told a recent forum. He took to Sina Weibo, China’s Twitter-like platform, to rage against the regulatory regime.

Jack Ma famously owns Alipay, the online third-party payment platform of his Alibaba Group. Nothing wrong with that, except that it is part of a larger operation that supports Yu’E Bao, Alibaba’s online fund that has been the envy of its peers and the scourge of Chinese banks, not to mention the worry of regulators.

Along with other operators, Alipay has had its barcode payment services, virtual credit cards and online fund transfer business suspended by regulators in recent weeks, the early signs of a crackdown on the loosely regulated market. At the same time, the company is facing increasing pressure from lenders which consider online payment services outside the banking system illegal and a threat to the country’s financial stability.

If Jack Ma is being backed into a corner, so is Pony Ma, who operates rival third-party payment platform Tenpay and Licaitong online fund. But Pony Ma has taken a different tack. First, he took the initiative to stop Tencent’s electronic fund transfer services at points of sale. He went on to say he understands the dilemma of China’s policymakers.

Tenpay is embedded in Tencent’s social networking applications which means it is not designed to be a major business on its own. Neither will it be a vital source of income for Tencent. Pony Ma’s social networking empire draws on a range of value-added services such as video games, social network apps and advertising. Tenpay’s role is to bring extra convenience to QQ and WeChat users for small transactions such as paying for a dinner or settling a phone bill.

When Agricultural Bank of China vice president Li Zhenjiang suggested that third-party online payment providers could offer limited services for small fund transfers not exceeding 1,000 yuan (US$160), the impact of any potential policy tightening to that effect would be mild for Tencent but potentially devastating for Alibaba.

Alipay and Tenpay are the backbone of Yu’E Bao and Licaitong, respectively. These internet fund products, along with a host of others, have been blamed for draining cash from bank deposits by combining higher returns with the convenience of online transactions.

That makes the battle over third-party online payment services a proxy war over internet finance and for the hearts and minds of bank depositors.  

Jack Ma is fighting a bigger one. He envisions a future without coins and banknotes but e-wallets, electronic apps that allow consumers to pay for anything online. He wants Alipay to have a bigger role in people’s daily life. If Alipay is shackled by micro payment restrictions, all of that vision will die away.

In Jack Ma’s grand plan, unfettered and safe access to online financial services is key. This goes for everything from retail, trading, value-added services and the entire e-commerce ecosystem. Alipay is a first-mover in this initiative but new players are coming up all the time. That means Jack Ma has no time to lose.

Unlike Jack Ma, Pony Ma does not have too many things to bet on, at least for the time being. He can simply watch from the sidelines as his rival battles his way through the regulatory maze.

If Jack Ma finds a way to kickstart his Alipay e-wallet strategy, Pony Ma can simply follow. But if Jack Ma fails, Alibaba’s relations with policymakers and watchdogs could sour. Tencent will simply play by the book and avoid ruffling regulatory feathers while waiting for the next chance to re-enter the market.

– Contact the writer at [email protected]


EJ Insight writer

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