Alipay and WeChat Pay account for the majority of mobile payments transactions in China. Alipay’s share of mobile payments has increased for three consecutive quarters, rising to 55.1% in the fourth quarter of 2019, according to research consultant iResearch. Tencent has 38.9% of the market. The Chinese antitrust agency has been gathering information on Alipay and WeChat Pay for more than a month according to Reuters.
This is not the first time the tech giants find themselves at odds with the People’s Bank of China. In 2019, Tencent and Alibaba refused to co-operate with a government-backed credit scoring programme by withholding access to their troves of customer loans data, according to the Financial Times citing two people familiar with the project. The People’s Bank of China (PBoC) launched Baihang, a private credit scoring company, in March 2018 in order to create a national system that would cover the 460m Chinese who have no formal credit histories but who may be relying on the country’s vast fintech sector for loans. Both companies were forced to abandon their own attempts at building credit-scoring agencies after the PBoC revoked their permissions to do so in February 2018. Instead, the PBoC set up Baihang and made the fintech giants shareholders in the new company in an attempt to break the tech giants’ oligopoly on credit data. But the new shareholding scheme has not smoothed the path to co-operation.
China’s new digital currency also takes aim at Alipay and WeChat Pay. The PBoC is hoping its new digital currency will reduce the dominance of Alibaba and Tencent in digital payments, according to several people familiar with the thinking of the central bank. The experimental digital currency is on trial in a number of Chinese cities and the PBoC intends to use it to simplify digital payments and interbank settlements.
“Regulators and executives at Ant, Alibaba’s financial affiliate, said PBoC officials have Alipay and WeChat Pay, the dominant digital payments platforms, firmly in their crosshairs” reports the Financial Times. The digital currency, if successful, is expected to This is the action by which certain banknotes and/or coins are exchanged for the same amount in banknotes/coins of a different face value, or unit value. See Exchange. the financial landscape dramatically, and could be used for cross-border payments with trading partners including Hong Kong. Several observers predicted the experiment will hasten the internationalisation of the renminbi and erode the status of the US Monetary unit of the United States of America, and a number of other countries e.g. Australia, Canada and New Zealand. as the world’s only reserve currency.
On August 7, US President Trump issued executive orders banning two Chinese apps from operating in America TikTok and Tencent’s WeChat. Shares of Tencent Holdings Ltd., fell as much as 10% hours after the announcement, erasing $35 billion from the internet giant’s market value. It is unclear whether the ban would include WeChat Pay, which 900 million people around the world used as of the end of 2019.