According to a report by Nikkei, Tencent is facing pressure from Chinese regulators to decrease the market share of its mobile payment platform, WeChat Pay. This request specifically targets in-person payments made through QR codes, rather than online shopping. The aim of this reduction is to promote the adoption of the government-backed digital currency, known as the digital yuan or e-CNY.
While specific figures for the desired reduction have not been disclosed, sources suggest that WeChat Pay is not actively seeking to expand its market share due to concerns associated with being too dominant. Currently, WeChat Pay and Alipay, operated by Ant Group, are the leading players in China’s mobile payment market, out of the nearly 185 non-bank payment institutions in the country.
The Chinese government’s push for the digital yuan comes as it faces challenges in gaining widespread acceptance. The currency’s non-interest-bearing nature and limited utility have hindered its adoption. A state-owned bank account manager in Suzhou, Sammy Lin, echoed this sentiment, stating that they prefer not to keep funds in the e-CNY app due to the lack of interest.
Mobile payments in China are a lucrative business, with total transactions through third-party service providers reaching 92.38 trillion yuan ($12 trillion) in the first quarter of 2024. QR code transactions accounted for 15.59 trillion yuan of this total, according to Beijing-based consultancy Analysys.
While estimates of market share in China’s mobile payments market vary, WeChat Pay is believed to be leading ahead of Alipay with a ratio of 3:2. WeChat Pay is also known for driving a higher number of transactions, particularly for small-value purchases.
The directive to reduce WeChat Pay’s market share has raised concerns among users, who argue that implementing such a requirement on a platform reliant on QR codes for transactions would be challenging.
Despite having a smaller marketing team compared to Alipay, WeChat Pay remains highly popular in China. It has a wide user base, even among older individuals in remote areas who use it for communication and transactions.
Tencent has also made efforts to make WeChat Pay accessible to international tourists in China. The tech giant recently signed a three-year agreement with tourism authorities in the Maldives to enable Chinese tourists to use WeChat Pay during their visits. The platform has undergone a pilot phase in various establishments, including restaurants, airports, and resorts such as Banyan Tree Vabbinfaru and Velaa Private Island.
In conclusion, Tencent is facing pressure from Chinese regulators to reduce WeChat Pay’s market share in in-person payments made through QR codes. This comes as the government promotes the adoption of the digital yuan. WeChat Pay currently dominates China’s mobile payment landscape alongside Alipay. The directive has sparked concerns among users, and the implementation of such a requirement on a QR code-based platform is seen as challenging. However, WeChat Pay remains popular in China, and Tencent has made efforts to extend its accessibility to international tourists.
