WeChat Pay review: customer reach and usage

6 September 2017

WeChat PayChina’s mobile payment market has boomed in the past few years. WeChat (Chinese name as Weixin) owned by Tencent, is known as the fastest growing all-in-one social messaging platforms, including gaming and person-to-person communication. However, one of WeChat’s enormous attractions is its mobile payment service, WeChat Pay. Since the service was launched in 2013, more than 300 million users have linked their credit card to their WeChat account and made payments within the app’s built in digital wallet. Years later, the combination of WeChat Pay and QQ Wallet is the No. 2 payment system in China. In this article, we highlight unique characteristics of WeChat Pay that have prompted its predominance in China.

What is WeChat Pay?

WeChat Pay is a one-stop payment tool that can provide a seamless online experience for the shoppers to transfer money between WeChat users (peer-to-peer) and make payments online by scanning a QR code, a prominent facilitator for transactions in WeChat, to complete the payment with the app without directing the users to the external websites. Moreover, WeChat sometimes has promotional discounts, which stimulate incentives for customers to adopt WeChat Pay.

As indicated by Worldwide Web Record, 33% of Chinese clients have utilized WeChat to make payment, which is similar to Alipay, the No. 1 payment system in China, owned by Ant Financial Services Group. The fact that WeChat Pay has managed to near the level of Alipay in just three years is wonderful.

Mobile payment services in China, as of February 2017

Mobile payment services in China, as of February 2017

WeChat Pay is catching up with Alipay

WeChat Pay’s expansion represents a growing threat to China’s current leader in mobile payment industry, Alipay, as many observers note. The core functions of the two organizations—WeChat Pay and Alipay —are similar: they both offer money transfer, bill payments, e-commerce payments, etc.

Below is a comparison table of WeChat Pay and Alipay.

  WeChat Pay Alipay
Number of users
(as of February 2017)
~300 million users connected by bank account ~400 million registered users
Key functions Money transfer, bill payments, e-commerce payments, mobile balance top-up, hotel booking, ticket purchasing
Differentiable
features
Investment in wealth management funds, taxi ordering Bill sharing, bank account balance checking
Currencies
supported
>9 18
Transaction
charges
0.1% per transaction over RMB1,000 0.1% per transaction once RMB20,000 limit passed
 

 

Focus markets

Over 20 countries, including China, Japan, Australia, India, Indonesia, Malaysia, Singapore, the UK, Italy and others Over 110 countries, including China, the US, Brazil, Russia, Germany, Spain, Italy, Israel and others

 WeChat Pay functions

As indicated by WeChat information, sending and receiving computerized “hongbao” (red envelopes filled with money that relatives transfer to younger family members and friends during Chinese New Year) is the most actively used service of WeChat Pay. The second and third most heavily used features are payments and money transfers, respectively. The red envelopes, combined with discount vouchers sellers give out around the holiday period, provide sales opportunities, as shoppers can utilize money and coupons to spend within the WeChat framework.

WeChat Pay Functions

WeChat Pay Functions Used by WeChat Users in China, as of March 2017

Online to offline

WeChat’s online-to-offline (O2O) potential is also growing. WeChat Pay has started to charge customers a fee, when they transfer money from their WeChat Pay account to their plastic card, and it, probably, makes users keep their cash in the WeChat payment account.

Likewise, WeChat Pay enables customers to make payments in renminbi without being anxious about conversion rate, when they purchase items abroad by means of the app. WeChat consequently adjusts payments with retail dealers in domestic currency.

Due to its differentiable feature, such as WeChat Pay, WeChat has a preponderant position in Celestial Empire, with no apparent competitors in sight. In spite of the fact that there are difficulties to expanding abroad, WeChat’s operation will probably be centered around monetization in China through ads and online exchanges in the following couple of years.

On the retail side, WeChat Pay is a driving power of disruptive e-commerce, as it closes the gap between social marketing and real engagement with users. There is a growing trend for traditional brands to adopt WeChat Pay as a major aspect of their business platform. WeChat Pay can be the key to access China, and possibly the initial step to building up an O2O channel.

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