Titans clash over mobile payments
The competition in China's mobile payment market is growing tougher with the standardization of China UnionPay's quick-response code technology in December. The head-to-head digital hongbao wars between the two dominant players WeChat and Alipay during the Spring Festival holidays provides one piece of evidence. Behind the cutthroat turf war, both of the platforms have broader ambitions, including creating tailored financial products based on their collections of big data. In the near future, the industry will also be subject to tighter regulations.
It was not so long ago that the red envelopes, or hongbao, that people handed out during the Spring Festival holidays were actual red envelopes.
But over the last few years, many of the red envelopes stuffed with cash have existed only virtually on online payment platforms.
During this year's Spring Festival, a record of 46 billion electronic hongbao were sent and received via Chinese mobile social platform WeChat, which is operated by Tencent Technology Co, the Xinhua News Agency reported on Saturday. The figure was up 43 percent year-on-year.
Internet giants such as Tencent have promoted the use of virtual hongbao to expand their stakes in China's fast-growing mobile payment market, as local shoppers are now using their smartphones to pay for everything from taxi fares to medical expenses.
In 2016, China's third-party payment market is estimated to reach 20.3 trillion yuan ($2.96 trillion), up 45 percent from 2015, according to research firm Enfodesk. It projected that the market will grow by more than 20 percent annually to 33 trillion yuan by 2018.
The huge market base has lured a number of companies, making the turf war for China's mobile payment market more cutthroat.
Early market entrants including WeChat and Alipay, which are run by Tencent and Alibaba respectively, have developed swipe-and-go payment systems based on quick-response (QR) codes. The two companies, which together control more than 70 percent of the market, have strived to secure their predominant position by spending heavily on discounts.
As a result, the use of credit cards has declined, rattling the country's bank card association.
On December 12, 2016, China UnionPay announced its own standards for QR code payments. The move was followed by promotional campaigns involving more than 20,000 stores from December to February, a peak time for shopping.
Latecomer
It is not the first time that China UnionPay stepped up efforts to tap the mobile payment market. In December 2015, the bank card association rolled out its near-field communication (NFC)-based Quick Pass mobile payment tool, which enables consumers to make payments by tapping their smartphones against payment terminals.
But the NFC-based technology was not as popular as QR codes.
"That's probably why UnionPay developed its own QR code last year," said Li Yi, a research fellow at the Internet Research Center under the Shanghai Academy of Social Sciences.
Li was not optimistic that commercial banks would be able to break in. "WeChat and Alipay have a lock on the huge market thanks to an early entrance," he told the Global Times on Monday.
But UnionPay still stands a chance in the mobile payment market because its technology is safer and more trustworthy, Li noted.
