Tencent’s WeChat mobile messaging tool to roll out overseas payment service as competition in cross-border market heats up
Smartphone users in China who communicate, like most people in the country, using Tencent’s WeChat mobile messaging platform will soon be able to pay for purchases made overseas using the app.
They will be able to use WeChat Pay if the app is connected to a Chinese bank or credit card.
In extending its payment services portfolio, the app is taking a cue from Alipay, which runs under e-commerce giant Alibaba’s affiliate Ant Financial. Alipay has already made its mobile payments service available to merchants outside of China.
WeChat has 650 million active users, a whopping 60 per cent of whom now use WeChat Wallet, its payment system. After linking their bank account to the app, they can use their phone to make transactions at Uniqlo, 7-11 and a range of popular stores.
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WeChat Pay is expected to prove a hit among Chinese tourists as they can use it overseas, pay in the Chinese currency and thus eliminate those pesky foreign transactions fees that credit card users pay.
Merchants receive the consideration in their local currency, according to WeChat, which announced the roll-out plans in a blog post last month.
The service will be supported in over 20 countries and regions, including Australia, Southeast Asia, Hong Kong and Macau. Transactions will be supported in nine currencies, including the Japanese yen, New Zealand dollar and Korean won.
WeChat’s move to secure a larger slice of the cross-border payments market puts it on a collision course with Alipay, which launched a similar service in January.
Chinese shoppers can now use Alipay at 50,000 offline merchants in Asia and Europe. The company has plans to increase that 10-fold by 2016, according to Miranda Shek, a spokesperson at Ant Financial.
“We are hoping that the service can make transactions easier for Chinese tourists when they travel so that they no longer need to prepare a lot of foreign currencies, especially at places where you cannot use credit or debit cards,” said Shek.
Chinese tourists are already the world’s biggest spenders, with 174 million expected to spend over US$250 billion a year by 2019, according to a report by Bank of America Merrill Lynch.
However, Alipay and WeChat may need incentives and promotions to entice tourists to use their payment services overseas, said Michael Yeo, senior analyst at IDC.
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“Wallets are generally used for smaller-value transactions such as buying daily goods and necessities rather than large-ticket items, which are the main focus of overseas shopping trips,” said Yeo.
Others maintain there are growing signs that Tencent and Ant Financial will further expand their payment services outside of China.
“It is not unrealistic to assume that there will be the potential for wallet functionality to take off once regulation ... in the different markets is ironed out,” said Yeo.
WeChat Wallet is already available in South Africa. This allows users to send cash electronically and pay for purchases via smartphone at over 24,000 merchants in the country.
Last week, South Korea issued licences to South Korea’s Kakao Corp. and KT Corp to operate the country’s first two internet banks.
KT Corp, the country’s largest phone carrier, will launch its online-only K Bank with Ant Financial and several other investors, while Kakao Bank is backed by Tencent.
Marie Sun, a senior equity analyst at Morningstar, said this is a sign that the mobile payment platforms of Tencent and Ant Financial may “expand to Asian communities” instead of only serving the Chinese market.