Almost a year after its arrival in Malaysia, WeChat Pay MY is forging new local partnerships to drive future growth. For Tencent, the Chinese owners of the app, there is far more than the Malaysian e-wallet market at stake.
In June 2018, WeChat created a splash with its entry into the nascent Malaysian e-wallet market. Called WeChat Pay MY, it was the brand’s first foray into a foreign market outside its home markets of China and Hong Kong.
Nearly a year later, WeChat Pay MY has shown strong and aggressive growth. With 20% of the e-wallet userbase, it currently occupies the fourth spot in an overcrowded market of around 44 licensed e-money operators.
At a recent company-sponsored event in Kuala Lumpur, WeChat Pay MY unveiled its ambitious plans for future expansion in Malaysia. They include increasing its local reach through tie-ins with SMEs, roadside vendors, kiosks and even vending machines.
It is quite clear that the Chinese brand has a considerable interest in the continued success of its Malaysian venture. A closer look at their motivations for entering the Malaysian market, as well as their trajectory so far in it, will provide a better perspective on Tencent and WeChat’s future plans.
They came for the tourists but stayed for the locals
The Chinese are world leaders when it comes to the adoption of cashless payments. Both WeChat and Alipay (owned by Alibaba Group) have a virtual stranglehold on the Chinese e-wallet market. With more Chinese tourists heading to overseas destinations, both companies have followed Chinese jetsetters and expanded to foreign markets to cash in on Chinese overseas payments.
Nearly 150 million Chinese headed abroad on vacation in 2018, with Southeast Asia receiving around 20% of that figure. According to the Malaysian Tourism Board, 2.9 million Chinesetourists visited the country last year.
While Alipay partnered with local banking giant CIMB to extend its reach into Malaysia, WeChat chose to enter the Malaysian market directly. It secured a license from the Malaysian Central Bank to begin operations. With 20 million Malaysian usersalready on the messaging app, making the leap to digital payments was a logical next step for WeChat.
Alipay’s joint venture with CIMB, called Touch’N’Go, allows them to cater to their key demographic of Chinese tourists effectively. Though the Chinese remain crucial for WeChat, the presence of a significant local base has encouraged Tencent to consider a more aggressive push aimed at Malaysian users as well.
Burning cash with “red envelopes” and other bonuses
WeChat Pay’s strategies in its first year in Malaysia have largely followed the template it perfected in China. Over there, it initially built a large user base through its messaging app before diversifying into cashless payments.
The main catalyst for WeChat’s explosive growth in China was the introduction of “e-hongbao,”, the digital red envelopes. In Chinese tradition, red envelopes are used to send money as gifts to loved ones during the New Year celebrations. WeChat Pay used the digital equivalent of these red envelopes to provide free bonus cash to its new customers in 2014.
In Malaysia, Tencent has tried to replicate the massive success of “e-hongbao” in China with nearly identical promotional offers called “
A big pile of cash can only get you so far in Malaysia
WeChat is not alone in forking out cash in order to attract new customers. The competition is intense in the Malaysian e-wallet scene, with both established banks and non-banking startups in the fray.
In fact, WeChat has been relatively restrained in its use of cash bonuses and promo offers. Others like Grab Pay and Boost have been more aggressive with their marketing campaigns. Boost, for example,will likely make significant losses for the next couple of years due to its promotional spending spree.
The stiff competition is causing an inevitable culling process, where the smaller firms are either eaten up by larger firms or forced out. The big five, which includes GrabPay, Boost, Touch’N’Go, WeChat Pay, and Maybank QRPay have the financial clout to weather this storm.
But spending sprees are not sustainable in the long run. WeChat and Alipay were successful in China because there was no real challenge to e-wallets in the cashless payments landscape. The situation in Malaysia is drastically different. Credit and debit cards have already penetrated the population, with over 11 million credit cards and 42 million active debit cards (2017 figures) for a population of just 31 million.
To have any hope of grabbing new customers, e-wallets will have to leverage partnerships with local merchants and businesses. Only those apps that can deliver maximum value, in the form of food, groceries, ride-shares and movie tickets can hope to survive and prosper. According to Jason Siew, CEO of WeChat Pay MY, it is the overall user experience that will drive the future growth of e-wallets at the expense of cards in Malaysia.
Partnerships with banks, supermarket chains, petrol stations, and even mamaks
Tencent knows the importance of merchant partnerships all too well from their experience in China. WeChat Pay has been active in building relationships in Malaysia as well. Around 3500 local merchants now accept payments via the app.
The company also has partnerships with big names like KK Mart, Starbucks, Petron Malaysia, Hong Leong Bank, and Genting Resorts. Now they are pushing for a more grassroots level approach, linking up with traditional Malaysian businesses like mamaks (street food vendors) pasar malam (night markets), and kuihmuih(traditional sweets) vendors.
Along with more innovative and high-tech initiatives like WeChat Pay-compatible vending machines and petrol kiosks, the focus is clearly on penetrating into areas where cash transactions remain the primary option for ordinary Malaysians.
Malaysia is important for WeChat and Tencent
Establishing dominance in the Malaysian market is a central part of WeChat’s growth strategy. There is not much room for growth in the domestic market in China, with Alipay holding around 55% of the market and WeChat Pay in control of the rest. Malaysia, with its combination of 20 million WeChat users, high mobile penetration, and dependence on cash transactions presented the perfect opportunity for growth.
If successful, it could offer a stepping stone to the highly lucrative Southeast Asian market.
WeChat’s rivals Alibaba have already taken the initiative, with a string of high profile moves in overseas markets, mainly involving strategic partnerships with local entities. Tencent is looking at alternative models of expansion, and Malaysia offers them the ideal testing ground. If WeChat Pay MY’s model turns out to be a success, it will offer the perfect blueprint to expand into other markets in the region and elsewhere.