There will be blood: WeChat's payments prowess makes it a target for Alibaba
While people in the US laugh at how ugly QR codes are, WeChat is using them as a killer payments tool. And it’s starting to scare the world’s biggest ecommerce player: Alibaba.
China’s leading mobile chat app, which is owned by Tencent, is emerging as a force in electronic payments, with the humble QR code serving as the chief form of transport for financial transactions and discount redemption through the platform. In response, Alibaba, which owns the PayPal-like Alipay, is ramping up what appears to be a campaign to undermine WeChat.
China tech newsletter Marbridge Daily today noted that Alibaba’s WeChat alternative, Laiwang, has accused WeChat of copying its community forum feature, in which the owners of public accounts can start a group discussion under their own name. The litigation-through-the-press came in the form of a long statement that Laiwang posted to its Sina Weibo account, Marbridge Daily said. Tencent has not yet responded.
The allegation is the latest in a series of Alibaba attacks on WeChat, which now has about 250 million monthly active users:
In August, Alibaba’s Taobao, an eBay equivalent, banned QR codes from its marketplace. That move was ostensibly meant to prevent fraud, but others saw it as a defensive shot against WeChat.
Alibaba has a lot to protect in Alipay. It is currently the dominant electronic payments provider in China, with 800 million registered accounts. It is so widespread that taxi drivers accept it as a method of payment. Parent company the Alibaba Group appears so confident in its success, especially as it expands abroad, that it recently spun off Alipay’s parent company as a separate entity. Alibaba will offer 60 percent of the new company’s shares to new investors, Reuters has reported.
But in August, Tencent introduced payments into WeChat, and early indications have been better than encouraging – they've been eye-opening. At the end of November, smartphone maker Xiaomi sold 150,000 phones solely through WeChat in the space of 10 minutes. A couple of weeks prior to that, 80,000 people used WeChat to buy products on 51buy as part of a limited promotion on “Double 11,” China’s equivalent of Cyber Monday. The WeChat purchases account for 13 percent of the 51buy’s total sales for that day. WeChat has also been running promotions that allow people to use QR codes to buy discounted goods from vending machines in Beijing subway stations.
When I interviewed investor Hans Tung, a venture capitalist known for his early investments in Xiaomi and ecommerce giant Vancl, in November, he said Alibaba will be wary of WeChat’s QR-powered payment power. In comments I didn’t include in that particular story, Tung said WeChat had “scared the hell out of Alibaba,” which is why it launched Laiwang. “What WeChat could do is put a huge dent in what Alibaba has done,” Tung said.
Meanwhile, former Android exec Hugo Barra put an exclamation mark on WeChat’s rise in an on-stage appearance at Le Web overnight. The new head of global operations at Xiaomi told host Loic LeMeur that his entire social life in China revolves around WeChat.
“Literally everyone single person I know, everyone I’ve met in China, is on WeChat,” Barra said. “I don’t use email, I don’t use phone, I don’t use text messaging to communicate with anyone – only WeChat.”
When you combine the reach of email with the personalization of a mobile phone and then attach a bank account to it all, you have a product that could wreak havoc on several industries. Tencent knows that. Clearly, Alibaba does too.
Get ready for a mighty battle between these two heavyweights. This fight isn't going away any time soon.
[Photo via Innovative China]