Chinese regulators are reportedly pressuring Tencent to reduce the market share of its mobile payment service, WeChat Pay, as the government promotes the adoption of the digital yuan. The request specifically targets in-person payments made through QR codes, rather than online shopping. While the desired reduction in market share has not been disclosed, sources suggest that WeChat Pay is not actively seeking expansion due to concerns associated with its large size.
WeChat Pay and Ant Group’s Alipay currently dominate China’s mobile payment landscape, outperforming nearly 185 non-bank payment institutions in the country. The regulatory intervention comes as the government aims to promote the use of the government-backed digital currency, known as the digital yuan or e-CNY.
The digital yuan was initially introduced in 2020 but has faced challenges in gaining acceptance due to its non-interest-bearing nature and limited utility. Sammy Lin, an account manager at a state-owned bank in Suzhou, echoed these concerns, expressing a preference for not keeping funds in the e-CNY app due to the lack of interest.
Mobile payments in China are a lucrative business, with total transactions through third-party service providers reaching 92.38 trillion yuan ($12 trillion) in the first quarter of 2024. QR code transactions accounted for 15.59 trillion yuan of this total, according to Beijing-based consultancy Analysys.
While estimates of China’s mobile payments market share vary, WeChat Pay is believed to be ahead of Alipay with a ratio of 3:2. WeChat also leads in terms of the number of transactions driven by small-value purchases.
The directive from regulators has sparked shock and concerns among users, who argue that implementing such a requirement on a platform that relies on QR codes for transactions would be challenging. Despite having a smaller marketing team compared to Alipay, WeChat remains highly popular in China, even among older users in remote areas who rely on it for communication and transactions.
Tencent has also made WeChat Pay accessible to international tourists visiting China. The tech giant recently signed a three-year agreement with tourism authorities in the Maldives to enable Chinese tourists to use WeChat Pay. The platform has been piloted in select restaurants, the airport, and resorts like Banyan Tree Vabbinfaru and Velaa Private Island.
Overall, Tencent is facing pressure to reduce WeChat Pay’s market share in in-person payments as the Chinese government promotes the digital yuan. While concerns about the digital yuan’s limited utility and lack of interest-bearing features persist, mobile payments in China continue to thrive, with WeChat Pay and Alipay leading the way.