Chinese Mobile Payments Market Breaking Into Niches

September 12, 2017         By: Steven Anderson

There’s an odd aphorism cruising around the Chinese mobile payments market right now, according to reports, and it underscores the nature of the entire market. “WeChat Pay for pennies, Alipay for big bucks.” It turns out that a closer examination of the market shows that the two firms are fairly close in market share and working along niche lines.

Reports from Asean Today help support this concept. Alipay is proving itself a friend to the big spender; not only is it going abroad with almost disturbing furor, it’s also offering itself up as an investment point. Alipay’s Yu’ebao monetary fund is actually proving more welcome to Chinese investors than Chinese banks, because Yu’ebao actually pays better.

Banks’ interest rates are 0.35 percent, but Yu’ebao is offering up a seven-day yield of 3.96 percent, better than 10 times the bank. As a result, Yu’ebao has ramped up its position to be the largest money market fund on Earth with $170 billion in assets behind it.

However, WeChat Pay isn’t out of the market, just operating in a completely different one. WeChat Pay gained a lot of ground back in 2014 when it started its “red packet” concept, taking advantage of the Lunar New Year “lucky money” tradition to encourage users to send money to friends and family.

This concept got users interested, but it also sort of cast WeChat Pay as a great option for small-batch transactions. While WeChat Pay does have a wealth management system, it’s seen as much less impressive than its equivalent over at Alipay. Interestingly, Alipay’s attempt to intrude on WeChat Pay with the Quanzi social networking tool was largely rejected by users.

It’s actually kind of surprising how dedicated to compartmentalization the public seems to be here; when one or the other tries to encroach on its rival’s turf, the user base roundly shouts it down or simply won’t patronize it. That’s putting the two firms in a position where they literally can’t diversify; the public just won’t allow it.

The Chinese mobile payments market is a strange place. While the two firms will likely have profitable niches to pursue for some time to come, any attempt to leave these niches won’t be well received.