It hasn’t been a week since Tim Cook unveiled Apple’s new payment technology coming with iPhone 6 and iphone 6+, and Tencent is already making a strong defensive move.
In case you have missed the rise of the biggest social network in Asia: WeChat is a Whatsapp / Facebook / Paypal hybrid with 438 millions monthly active users, a profit which rose 58% year-on-year as of last June and a near domination in social medias in China. It is also expanding with investments in other major Chinese companies such as Jindong and Sougou.
Tomorrow, some shops in China will start accepting “Small Payment” for WeChat users (in Chinese “刷卡”, “swipe card”).
How does it work
When users open their WeChat account, their “Wallet” now displays a new icon pop-up: Small Payment
WeChat payment simply displays a bar code which you can show to the cashier of partner stores in order to pay amounts below 300 RMB (~50 USD) without a code. Above this amount, you will be asked to enter your secret payment code.
For safety reasons, the QR code is renewed every minute or with a swipe.
As of tomorrow 9 brands will start accepting WeChat payments at the cashier. They include major supermarkets, pharmaceutical product stores, furniture stores etc…
What will come next
Internal sources from Tencent indicate that, although the function will not be available right away, shoppers will quickly be invited to add the public account of the shop, which will enable everything from after-sale CRM, checking purchase history and receipts, membership discounts to customized recommendations.
The battle ahead
The fight for mobile payments in China is going to be fierce. Alibaba, with Alipay, benefits from its existing leader position, owning today nearly 80% of the market. Apple, on its side, benefits from the integration of software and hardware which will enable it to leverage the Near Field Communication technology for a more convenient payment experience.
The first challenge for Apple in China will be the stronger and stronger competition from Android phone makers: local companies such as Xiaomi already outperform Apple in China when it comes to sales volume. With such a trend, it is unclear to which extent Apple will manage to strike the right deals to implement its Apple Pay (with a background of stronger and stronger government regulation of the IT sector to protect the local ecosystem) or convince vendors to instal the corresponding hardware.
Moreover, Tencent has a strong asset in its hands: it currently owns the dominant social network in China. This means that WeChat will be able to extend the shopping experience way beyond payments. By enabling merchants to interact with customers on a long term basis, and with Chinese customers very eager for discounts and promotions, the integration of payments with social and messaging features might very well be the winning formula.
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