Alipay and Tenpay compete head-to-head for overseas market share

As the Chinese payment market intensifies, Alipay and Tenpay look to overseas markets for expansion.

Edited by Joelyn Chan

Challenging Alipay’s longstanding dominance, the introduction of Tenpay – Tencent’s integrated payment platform with Wechat Pay and QQ wallet – intensifies both local and overseas competition. According to iResearch China, Alipay’s market share shrank from ~80% in 2014 to just ~50% in 2017. Tenpay’s market share increased from 7% to 40%, during the same period.

Tencent’s advantage lies in the integration of instant messaging platform – QQ and popular messaging app – Wechat. Monthly active users respectively hit 861 million and 938 million in the year’s first quarter. A survey found that the average Chinese spends one-third of their smartphone time in WeChat, and this will increase. On the other hand, Alipay’s mobile app utilisation level averages around 14 to 15 times a day. Alipay tries to drive its growth by collecting data to enhance user experience. This strategy may help Alipay to retain existing customers, but it is insufficient to close the widening gap in the booming mobile payment industry.

Growth of mobile payment giants

From 2015 to 2016, China’s mobile payment users rose by 30%. The 469 million user base represented two-thirds of the nation’s mobile phone users. Currently, Alipay has about 520 million registered users, many of whom use e-commerce platforms like Taobao. Tenpay surpasses Alipay with 600 million payment accounts. The integration with WeChat accounts for part of the sharp spike in user base. The volume of Tenpay transactions is on the rise as Tencent offers popular functions to gift red packets, split bills, perform swift fund transfers, and it capitalises on external partnerships with firms like Meituan-Dianping from the food industry and Didi Chuxing from the cab-hailing industry.

Sources: iResearch China (1,2,3,4,5) , AskCi (1,2), CCtime, Sohu

The race to gain ground in overseas markets

Ever since the mobile payment industry surfaced in the 2000s, the fight for market share is relentless. The Chinese market became saturated with the dominating Alipay, Tenpay and smaller players. Strong domestic competition hinders greater growth, and the same effort could reap more benefits abroad. With that, the battle continues, as Alipay and Tenpay started expanding overseas in 2015. They target the 120 million Chinese tourists who travel abroad yearly.

Source: iResearch China

Alipay’s overseas expansion has been the fastest, bringing Alipay to 28 countries and only 15 for Tenpay. Both firms signed agreements with merchants in Southeast Asia and Europe to invest in mobile payment systems abroad. These agreements mark the first step into the market, but it does nothing to stop merchants from conveniently signing up for the competing services at their point-of-sale terminals. For example, HighKr Lanna Gun Range in Thailand used to offer Alipay services only, until they quickly added Tenpay services to cater to a wider base of customers. Such move comes as no surprise as merchants woo Chinese tourist dollars.

The race is not ending soon as the giants plan for future expansion

Alipay’s ultimate aim is to build up payment infrastructure even in developing and smaller countries. Its proposal to purchase MoneyGram International (MGI) for US$1.2 billion allows Alipay to enter the remittance field. That is not all for Alipay as there are ventures in artificial intelligence, “Smile and Pay” technology, “TechFin”, and their purchase of Baidu’s delivery service. These will all help improve its market competitiveness and gain an edge over Tencent’s offerings.

Tencent continues to expand overseas and explore out-of-the-box options. For one, Tencent invested 5% stake in Tesla to explore future transportation opportunities. Re-enacting its game-changing “red packet” success in 2014, Wechat now supports India-based Hike Messenger’s launch of “blue packet” function. If Tenpay can cement its position in another populous country, its dominance will be unrivalled.

While Alipay and Tenpay fight for the winning crown, foreign companies struggle to enter the Chinese market that has credit cards restrictions and intense competition from existing third-party payment services. Thus, Alipay and Tenpay need not worry about their home market and can focus on their current challenge to successfully roll out their strategies overseas. This battle will be an important one to watch.