An employee from a commercial bank, who preferred not to be identified, agreed. "UnionPay also has an advantage in large payment transactions because WeChat and Alipay are more frequently used in payment of small amount," the bank employee told the Global Times on Monday.
For example, the two digital wallets account for around 80 percent of the mobile payment market which are under 5,000 yuan, according to the employee.
However, Liu Dingding, an independent Internet industry analyst, pointed out that the cooperation between UnionPay and commercial banks is crucial to the bank card association's goal of getting to the top.
Currently, UnionPay and the commercial banks have a "strange bedfellows" relationship, Liu said.
"UnionPay is looking to promote QR code with banks, but the logistics behind major banks' moves are different - they seek to expand the user base of their own mobile applications so that they can engage with clients directly, which means banks may also cooperate with WeChat and Alipay if UnionPay's promotion has not achieved their desired result," Liu told the Global Times on Sunday.
Broader ambitions
To date, the battles in the mobile payment market between the two tech giants, Alibaba and Tencent, have also intensified.
Head-to-head against WeChat's hongbao-grabbing activities during the Spring Festival, Alipay continued last year's collection of five good fortune games with the introduction of augmented reality technology. Participants can split a 200 million yuan prize by scanning the street-side "fu" signs, or the Chinese character of fortune, that are ubiquitous during the holidays.
To attract users, the two digital wallets are also locked in a competition for offline payment points for businesses such as restaurants, supermarkets and department stores. Therefore, both platforms turned to third-party services providers who specialize in "offline promotion" and merchants services for potential offline business growth.
For example, WeChat announced in April a plan to attract third-party services providers with more than 300 million yuan in investments. Alipay also plans to provide 1 billion yuan in rewards to third-party services providers over the next three years.
But behind the tit-for-tat competition, both Alipay and WeChat have broader ambitions.
One is the collection of big data related to transactions, which enable those platforms to invent and tailor financial services such as marketing strategies, investment and loans to their clients, Liu said.
Tencent has been struggling with how to generate revenues based on its huge consumer bases. In an interview with Caixin magazine in January, Huang Li, director of WeChat Payment, refused to elaborate on the business blueprint for the platform, only noting that the company is considering a strategy "as a whole."
Regulatory controls
In the near future, the country's third-party payment market will face greater regulatory control.
In January, the People's Bank of China (PBC) announced a new regulation that requires third-party payment companies to deposit clients reserve funds in bank accounts that do not generate interest. The new rules are intended to ensure institutions do not put the money into "risky" financial services. It is expected to takes effect in April.
An Alibaba spokesperson refused to comment on the policy's effect on its business. He said that the company "welcomes the policy and will actively impose it."
According to a report published by research firm TrendForce, following the policy implementation, major domestic payment providers, including Alibaba and Tencent, will suffer a blow, as the policy prevents them from using the funds to generate interest income or grow their business.
But Li disagreed. "Large-scale firms do not rely on interest from client funds. So the new measures will only hurt small third-payment firms."
Yet the policy is likely to tip the scales in UnionPay's favor, Li noted.
