WeChat Pay and Alipay are the leading players in the Chinese mobile payment market, but they have some key differences. However, both are beginning to make a splash outside of China.
WeChat Pay, also named TenPay, started competing with Alipay in China in 2013 when WeChat expanded their mobile messaging platform to offer payment services. WeChat Pay made enormous gains in a short time and the same progress would see them overtake Alipay in 2017 in China. In terms of global monthly active users, however, WeChat’s advantage over Alipay is significant and has contributed to the rapid growth of WeChat Pay users to more than 300 million monthly.
WeChat Pay are also closing the gap in terms of market share among third-party payment providers in China. In the fourth quarter of 2015, Alipay’s market share was 68.4%. At that time, WeChat Pay’s was only 20.6%, according to figures produced by Analysys. In the second quarter of 2016, Alipay claimed 55.4% of the mobile payment market and WeChat Pay 32.1%. In 2016, Alipay and WeChat Pay remained ahead of their competitors but even though Alipay still ranked first, its share dropped to 50.4% and WeChat Pay’s grew to 38.1%.
Alipay and WeChat Pay offer similar services but there are differences
One specific campaign highlighted major differences between the two providers. WeChat leveraged its huge communication platform user base to draw people in and share lucky money “red bags” with their friends. A user donates a sum of money to friends in their chat group and the “red bag” is randomly divided among them.
WeChat owners Tencent announced that 420 million people used the WeChat mobile app to participate in lucky money on the first day of the Chinese New Year in 2016. Tencent also claimed that 409,000 virtual “red bags” were sent as the New Year was heralded. The person who donates lucky money can pay with either their WeChat balance or a bank card which is connected with WeChat. When a user receives lucky money, the money is added to their WeChat balance.
Alipay was caught by surprise by WeChat’s lucky money feature, and founder Jack Ma called it a “Pearl Harbour attack”. However, to attract more users, Alipay spent US$120 million by targeting 700 million Chinese TV viewers welcoming in the lunar new year on February 7 2016. Alipay repeated the campaign this year, setting WuFu cards. Users needed to collect five Fu cards to receive lucky money from Alipay.
How the two systems deal with balances and transactions also differs
WeChat Pay charges users a fee when they make money transfers from their WeChat balance to a bank account. They are charged a 0.1% transaction fee for withdrawing sums more than RMB¥1000 (US$153) with a minimum transaction fee of RMB¥0.1 (US$0.01). Money in the WeChat balance cannot be used to buy any WeChat financing products. Therefore, to avoid the transaction fee, users can spend online or in the offline stores. “The transaction fees will encourage users to make fewer withdrawals and thus keep more money circulating within the WeChat Wallet ecosystem, therefore increasing the opportunities for other spending within it,” said IDC analyst Michael Yeo.
Alipay charges transaction fees of 0.1% after each user withdraws a total of RMB¥20,000 (US$2,897). Users can buy financial products within Alipay to avoid the transaction fee, and then transfer their money into a bank account. Alternatively, users can withdraw the balance via Yu’e Bao. Speaking when the charge was introduced, Zhang Jie, who works for a research company in Beijing, said, “If the amount is small, money transfer via online banking is free of charge. So I don’t need to keep too much money in my Alipay account in the future.”
Alipay and WeChat Pay both offer money market funds
Alipay’s Yu’e Bao and WeChat’s Wealth money market funds both offer many features to users, with similar limits on transfers, service fees and transaction times. While Wealth supports only debit cards for transfers, Yu’e Bao offers more options such as using their balance or making a Taobao payment. Both offer the same return on investment.
Yu’e Bao, described by Instituational Investor as the “fastest-growing mutual fund of all time”, remains ahead of Wealth. At the end of last year, their assets stood at US$94.4 billion. In terms of numbers of users, Yu’e Bao boasted 260 million users at the start of last year. WeChat added 10 million users one year after launching and 60% of WeChat users in China use its wallet service.
While Alibaba has not disclosed payment processing data since 2013, when the figure stood at US$519 billion, WeChat Pay’s processed payments are estimated to be in the region of US$550 billion, suggesting they are closing the gap.
Both WeChat Pay and Alipay are making an impact outside of China
Alipay is rapidly expanding its payment service into Asia, Europe, and now to the US. On October 24 2016, it announced partnerships with payment processors First Data and VeriFone ahead of its official entry to the US market. Alipay started cooperations with 10 international airports, and more than 80,000 retailers, covering 70 countries, inserted the mobile payment system.
WeChat Pay introduced its international payments solution in South Africa, where users can now send and receive money using WeChat Wallet as well as withdraw cash from ATM machines. While Alipay’s overseas expansion is well underway, WeChat Pay are taking their first steps. To this end, WeChat Pay cooperated with global payments technology company Adyen to help businesses worldwide access customers in foreign countries.