WeChat Pay Moves Against Alipay in Overseas Expansion
Two of China’s largest tech giants are increasingly looking overseas for future growth, betting that their business models will succeed outside their home base as they look to diversify geographically.
Two of China's largest tech giants are increasingly looking overseas for future growth, betting that their business models will succeed outside their home base as they look to diversify geographically.
The two companies, Tencent and Alibaba, together leaders in social media, online shopping, and mobile payment platforms, are signing agreements with various partners in foreign countries to make the expansions possible.
The strategy, which is playing out in more than a dozen countries, has initially targeted Chinese tourists, as the country's rising middle class is increasingly spending more and traveling overseas. However, the companies are expected to eventually expand and target the local population.
Chinese tourists mostly travel to nearby countries. According to Ctrip data cited in China Daily in 2016, the five countries receiving the most Chinese tourists are all in Asia: Thailand, Singapore, South Korea, Japan, and Malaysia. Vietnam and the Philippines are also in the top 10.
Both Tencent and Alibaba are looking to extend their operations of dominance into these countries.
Tencent Holdings Ltd. (OTCMKTS: TCEHY) owns WeChat, the messaging app in China with nearly 1 billion monthly active users. As of last year, its payment service WeChat Pay boasted 600 million users. WeChat Pay's rival Alipay, launched by Alibaba Group Holding Ltd. (NYSE: BABA) in 2004, currently dominates mobile payments in China, but WeChat Pay holds second place.
The companies are gambling that tourists want the convenience of paying with WeChat Pay or Alipay when they go abroad.
WeChat Pay's Push Abroad
So far, according to WeChat Pay's website, it is available in 15 countries and territories. One of the more important expansions has been into Japan, which is a top destination for Chinese tourists. According to the Japan Times, more than 6 million Chinese visited the country last year. In April, the prepaid and payment services company InComm announced that it signed a deal with Tencent allowing Chinese tourists to use WeChat Pay at locations in Japan. InComm's payment network is available at 50,000 stores in Japan.
The Philippines has also been a key destination. Tourism from China is growing more than 30 percent a year, and earlier this year, Tencent signed a deal with Asia United Bank in the Philippines to allow Filipino businesses to accept payment via WeChat Pay.
In Vietnam, the company signed a deal with the Vietnamese mobile wallet VIMO.vn, enabling Chinese tourists using WeChat Pay to pay Vietnamese merchants with local currency.
And in Australia, Tencent, Mastercard Inc. (NYSE: MA) and the venture capital firm Sequoia China invested $13 million in Airwallex, an Australian start-up which uses machine learning technology to lower the cost of international money transfers and can be integrated with WeChat Pay.
With most of these deals, WeChat Pay focuses exclusively on Chinese tourists. But in Malaysia, which will be an important test for WeChat Pay and its plans for future expansion in the region, WeChat Pay is looking to make inroads with locals as well. Roughly one-fourth of Malaysians have Chinese ancestry. Tencent obtained a local payment license in Malaysia and announced that it would begin rolling out WeChat Pay next year.
The company has also targeted Europe for expansion as well. In July, the German payment processor Wirecard partnered with Tencent to enable Chinese tourists to use WeChat Pay at locations in Europe. And earlier this year, the company struck a deal with the French bank BNP Paribas to let Chinese shoppers use WeChat Pay at two department stores in Paris, the Galeries Lafayette Haussmann and Le BHV Marais.
Alipay Also Eyes Overseas Expansion
Alipay is also expanding abroad, and while the company's announcements have not been as plentiful as its rival, the two companies will likely end up competing in most of these countries.
Last year, Alibaba subsidiary Ant Financial (which runs Alipay) invested in the Thai mobile wallet company Ascend Money. In February, Ant invested in Mynt, which owns the Gcash payment service in the Philippines. And in November, Ant Financial signed an agreement with the National Payment Corporation of Vietnam (NAPAS), allowing Chinese tourists to use Alipay in Vietnam.
And as these two Chinese tech giants continue competing over new markets in 2018, don't be surprised if they're not the only ones looking for overseas opportunities. On Dec. 8, Reuters reported that the Chinese ride-sharing provider Didi Chuxing will enter Mexico next year.