Thursday, May 30, 2019

WeChat and Alipay’s overseas expansion proves difficult

Alipay and WeChat Pay dominated Chinese payments since their launches. The duopoly changed how Chinese people pay and shop on their mobile device. Over the last three years, the duopoly relationship stabilized with WeChat holding ~40% of market share.
Source: Analysys (1, 2, 3), Big data
Expand the battlefield to overseas market
China has a population of 1.4 billion. According to Alipay’s December quarter 2018 financial report, there are 700 million Chinese Alipay users. Early 2018, Pony Ma, CEO of Tencent, announced that WeChat had hit the 1 billion user mark. As growth stagnates, both Alipay and WeChat must find growth overseas.
There were 140 million Chinese overseas travellers in 2018. Almost 10% of global travellers are Chinese. Chinese citizens in 2018 transacted about US$120 billion overseas. Alipay and WeChat are now in more than 54 and 49 countries respectively. They are waging a price war to attract users and merchants. For example, Alipay offers up to 50% off discount in some drugstores in Hong Kong; WeChat Pay, on the other hand, sends a customized red packet to the user who purchased in cooperated stores. 
Overseas discount and services Alipay vs WeChat Pay


Apart from discounts and red packets, they are also providing tax rebate services for overseas Chinese travellers. WeChat helps the merchant to build mini-application to monetize their traffic by turning the offline traffic into online traffic.

Paris BHV mini-application in WeChat
In addition to organic growth, both Chinese giants have actively sought M&A and strategic partnerships in the region.

Alibaba fintech related overseas investment
Timeline
Country
Partner
Shareholding ratio
Approach of cooperation
Jan 2015
India
Paytm
40%
Invest + Tech support*
2015
Korea
K-Bank
N/A
Sponsor shareholder + Tech support
Nov 2015
Singapore
M-Daq
N/A
Invest
Nov 2016
Thailand
Ascend Money
20%
Invest + Tech support
Feb 2017
South Korea
Kakao Pay
20%
$200 million investment
Feb 2017
Philippines
Mynt
Major shareholder
Invest + Tech support
Mar 2017
Indonesia
Emtek
N/A
Joint-venture company
Mar 2017
Malaysia
Maybank/CIMB
N/A
Integrate
Apr 2017
Singapore
Hellopay
N/A
Merger (rename as “Alipay”)
2017
The U.S.
MoneyGram
N/A
(Failed)
2018
Pakistan
Daraz
100%
Acquire**
Mar 2018
Pakistan
Telenor Microfinance Bank
45%
Invest + Tech support
Apr 2018
Bangladesh
bKash
20%
Invest + Tech support
Jan 2019
Indonesia
Akulaku
N/A
Invest
Feb 2019
UK
WorldFirst
100%
Acquire

*Tech support means to apply Alipay’s technology to the e-wallets system to help improve the payment experience, etc.
**Acquire means to own 100% stake of the company.

Tencent fintech related overseas investment



Source: Reuters (1,2, 3), CNBC (1, 2), Kr-Asia, Tech Crunch
Alipay and Wechat deployed various strategies to overseas market growth comprising investments, acquisitions and technical support. In fact, Alipay has successfully developed nine overseas e-wallets for local users in this way.
Alipay overseas e-wallet partner

Challenges ahead
The battle between Tencent and Alibaba continues. In 2017, Alibaba invested in Mynt, the top mobile payment operator in the Philippines. Shortly after that, Tencent announced an investment in Voyager Innovations, the major rival of Mynt. Unlike the domestic market, the competition of overseas mobile payment market is far fiercer. There are around 40 e-wallets in Malaysia, 27 e-wallets in Singapore, about 37 e-wallets in Indonesia, 26 e-wallets in Vietnam, at least 17 e-wallets in the Philippines.
Early 2018, Alipay failed to acquire US-based MoneyGram because it failed to meet CFIUS (Committee on Foreign Investment in the U.S.) requirements. Nepal banned Alipay and WeChat Pay due to security concern. It is difficult for them to apply for local payment licenses. 
The battle for payment domination between Alipay and WeChat Pay is now internationally. Some patterns that proved to be good in China do not work well overseas. They should be more innovative to get themselves adapt to the global market.