Cash has taken hundreds of years to establish its status as a common medium for trade, but it is quickly turning obsolete across China. Replacing it, the ubiquitous QR code-based mobile payment solutions operated by internet giants like Alibaba and Tencent.

From flagship stores of top-notch luxury brands to street butcher shops, payment through third-party apps is as valid as cash itself, only with faster and less of a hassle. Data from research institution iResearch shows that the value of China’s mobile payments market tripled to more than RMB 38.5 trillion ($5.6 trillion) in 2016 and is projected to reach RMB 55 trillion in 2017.

Now the same mobile payment craze that has taken China is making a foray into overseas markets. Alipay and WeChat Pay, the two third-party payment tools that nearly split China’s mobile payment market, are pushing the trend.

Who controls the tourists…

When tapping overseas markets, both companies chose the soft landing approach through easy entry points in Chinese outbound tourists. Known as the world’s most voracious spenders, 135 million Chinese outbound tourists spent a total of $261 billion in 2016, according to World Tourism Organization.

Like in China, the two firms are diligently forming local partnerships to promote themselves as a commercial solution. But the partners they are looking at skew toward those more commonly visited by tourists, such as airports duty-free shops, scenic spots, restaurants, and convenience stores.

Regions and countries like Hong Kong, Thailand, Japan, and Korea are the most popular destinations for Chinese tourists. They are also the places where Alipay record most active overseas usage, a spokeswoman from Ant Financial told TechNode.

Although tourist consumption remains the top priority in the overseas market, the companies behind them are moving towards local users through investment or partnership with local firms. Since 2015, Alipay’s operator Ant Financial invested a series of local e-wallet and fintech startups including Paytm (India), Kakao Pay (South Korea), Mynt (the Philipines), Ascend Money (Thailand), and HelloPay (Singapore).

“In the long run, synergy effects between Alipay and these firms would be created for sharing the technologies, data, users and consumption scenarios,” Andy Li, CEO of SEA fintech startup Silot, commented.

From Alibaba’s perspective, it’s more appropriate to define the initiative as the globalization of Ant Financial’s whole financial ecosystem, of which Alipay is just one part, according to the Ant Financial spokeswoman. Ant Financial expects half of its users coming from overseas market in the future four years, local media has reported (in Chinese).

On the other hand, social networking and gaming giant Tencent is also trying a similar path with investments in Australia-based cross-border payment startup Airwallex, shortly after Tencent co-founder Zeng Liqing invested in RoyalPay, another Aussie cross-border payment service April this year.

“Both Alipay and WeChat Pay are going after tourists first… In stage two, they will open up local wallets to enable peer-to-peer transactions within the local economies. That’s quite ambitious because there’s a lot of regulations,” commented Matthew Brennan, co-founder of China Channel.

“In order to enable that, they have to partner with local companies. It is a slow process in most places. In many countries, I think it’s most likely impossible. Tencent has local wallets in South Africa and Hong Kong. They are able to do it in South Africa because of Naspers, which is a key investor in Tencent. The same for Hong Kong as its so close to China. But every other country is challenging for them,” he added.

For Alipay in particular, it may encounter an extra hurdle from the local banking system. “Alipay may or may not be seen as a potential competitor towards the local banking system in overseas markets as Ant Financial’s domestic success in operation financial products have previously disrupted the traditional banking system in China,” according to Andy.

WeChat Pay plays catch up

Going for totally different markets that feature diverse market conditions and user preferences, internet giants may lose some of their competitive advantages and the secret recipe to local success may act as a hurdle in the exotic land. Only quick adapters to local markets could win.

As one of the earliest entrants to the market, the 13-years-old Alipay was practically the sole dominator in China’s mobile payment sector. It holds over 80 percent of transaction value across China three years ago. However, the app is quickly surrendering territory to a new rival—WeChat Pay. In Q1 2017, Alipay’s market share dropped to 54 percent, while WeChat Pay claimed 40 percent.

Born August 2013, WeChat Pay’s domestic success largely stems from the fact that it’s an extension of social networking and IM tool WeChat, which guarantees high-frequency use from users. On the other hand, Alipay, originally created to provide payment solutions for Alibaba’s e-commerce platforms, has lower usage frequency simply because it is needed only when people need to pay for something.

The red envelope war between WeChat and Alipay is a great example of how the rivalry would shape their relationship domestically. This same reason is also the driving force for Alipay’s endless endeavors to explore social networking features, although most of them failed to click with the users. But when exploring overseas markets where WeChat claims weaker presence due to competition from potent chat apps like Facebook, Twitter, and Line, its support in engaging clients and users for its payment unit is less effective.

“Going after payments rather than social [in the global market] makes a lot of sense for WeChat. The boat has already sailed in terms of social network for messaging apps globally. Facebook won that war,” Matthew says.

Given that, Alipay’s first mover advantages are more obvious after eying overseas for almost a decade. It’s being accepted in more than offline 120k stores in 26 countries across Europe, North America, East Asia, and Southeast Asia. WeChat Pay is now available in 15 countries and regions for payments in 12 currencies.

Despite these hurdles, some hold a more positive view on WeChat Pay’s prospect overseas. “The dynamics inside and outside China are very different. Inside China, Alipay started with a clear head start both online and offline. Outside China, it is very much a blank slate. The main question is which payment method are merchants going to pick. [WeChat] seems to be likely to win the race. But it has much to do with how well they keep marketing their payment solution to overseas merchants,” said Thomas Graziani, CEO of WalktheChat, a WeChat marketing consultancy.

“The main driver here is education. It takes a lot of effort to give overseas merchants a clear understanding of how to integrate either WeChat or Alipay to their existing system. This is the main hurdle to growth,” Thomas added.

The chicken or egg dilemma in Southeast Asia

Several reasons led to China’s mobile payment boom: wide network coverage, high smartphone penetration, and a surge in O2O apps. While infrastructure and prerequisites are all set, we can expect the mobile payment boom as a natural outcome. But when addressing overseas markets that are in various developmental stages, things are different.

“Fintech has experienced two development stages so far. The key words for the first phase are connectivity and enabler, where we set up the infrastructure of the mobile internet and mobile payment to facilitate the interactions between different entities. In the second phase, the keywords are big data and AI, where massive amounts of data are generated,” Andy Li told TechNode.

International (left) and Chinese version of WeChat Wallet (middle and right)

Overseas users often complain that the international version of WeChat is just a stripped down version of the Chinese original and this is often cited one of the reasons for WeChat’s international failure. For Andy, it’s hard to blame Tencent for this not only because it’s tons of work to negotiate new partners across the world, but also because the lack of local infrastructure in some under-developed regions, like Southeast Asia, has made it impossible to support some of the features.

Currently, Alipay and WeChat Pay’s overseas expansion are centered around East Asia and Southeast Asia, which turns out to be the first stop of most Chinese internet companies thanks to the similarities between China and these regions.

The tech landscape in Southeast Asia is very similar to China’s five to ten years ago when the infrastructure was still under construction. “Alipay and WeChat Pay’s promotion of mobile payment solutions in these areas is accelerating the construction of infrastructure. Now it’s like a chicken and the egg situation,” Andy pointed out.

Next frontiers: Europe, North America, and Australia

Meanwhile, Alipay and WeChat Pay’s head-on competition is expanding to more developed markets. Tencent launched WeChat Pay service in Europe this July, two years after Alipay rolled out its service in the region in 2015.

Both solutions entered US market through a partnership with local payment solution providers like First Data and CITCON. They are supported in some of the largest public spaces like Asia Art Museum, Pacific Gateway, and Caesars Palace. among others. Australia has recorded many new moves from both of the companies.

Developed markets have a solid foundation for mobile payment through using digital currencies and credit cards. But smartphone-based mobile payment that generates big data on location and user habits would still pose great potentials in these markets, Andy noted.

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Emma Lee

Emma Lee (Li Xin) was TechNode's e-commerce and new retail reporter until June 2022, when she moved to Sixth Tone to cover technology and consumption. Get in touch with her via or Twitter.

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