Why Tencent Lags Alipay In Cross-Border Payments

In the mid-2010s, the fintech business of Tencent grew exponentially, with WeChat Pay and its offshoots allowing the company to become a viable competitor to Alipay in China. Yet even as Tencent captured close to half of China’s payments market, and established a digital bank, WeBank, that could rival Ant Group’s MYbank, it never displayed the same kind of appetite for global expansion as Jack Ma’s company.

The reason for Tencent’s greater caution overseas is multifold. On the one hand, its CEO Pony Ma is a different personality than Jack Ma, and did not – at least not that we are aware of – display the same kind of ambition to build a regional payments ecosystem in Southeast Asia as the Alibaba founder. Second, Tencent’s core business is gaming rather than e-commerce, and the synergies between gaming and fintech are not as significant as online commerce and digital financial services.

Third, the use of Tencent’s fintech services is heavily tied to the WeChat messaging app; if you don’t regularly use that app, you aren’t going to be one of Tencent’s fintech users either. Alipay, on the other hand, can be more of a pure payments tool. And although WeChat Pay is widely present outside of China, its adoption has been generally limited to Chinese speaking users.

The Limitations of the WeChat Ecosystem

While Alipay+ has its drawbacks, at least its value proposition is clear: Ant reckons that Alipay+ can minimize friction in fragmented payments options by boosting interoperability – initially in Southeast Asia but now also Korea and Japan. When a merchant installs Alipay+, merchant’s customers can then pay for goods and services with any of the participating wallets in the ecosystem rather than having to ensure interoperability with the wallets one by one.

In Tencent’s case, there is no compelling reason to using WeChat Pay overseas, other than as a convenience if one is a Chinese traveler, and similarly if one already uses the WeChat messaging app it is handy to use the accompanying e-wallet. WeChat Pay can be used in many countries across Asia, including in Malaysia and Singapore, where there are large Chinese speaking populations, but it does not have a major share of any payments market besides China’s.

Pre-pandemic, Tencent was focused on capturing opportunities created by the growing number of Chinese travelers overseas and it appears that the company is continuing on that path even though outbound Chinese tourism has yet to fully recover. In late June, WeChat Pay and NMB Bank Nepal announced that Tencent’s e-wallet would be available to Chinese visitors to the South Asian country, completing what has been a long and drawn-out process. The Nepalese central bank first said in February 2020 that NMB Bank would be allowed to partner with WeChat Pay in Nepal, but the pandemic forced them to put the project on ice.

Though Nepal is not a major destination for Chinese tourists, the South Asian country nonetheless sees clear benefits of facilitating the use of Tencent’s e-wallet. “With Chinese nationals making payment via WeChat Pay, it will help Nepal earn foreign currency,” Sudesh Upadhyaya, deputy CEO and chief information officer of NMB Bank, told the Kathmandu Post.

What About Tenpay Global?

In addition to WeChat Pay aimed at Chinese overseas travelers, Tencent also has created the Tenpay Global suite of products. It seems intended to be Tencent’s answer to Alipay+, but without the same clear value proposition of facilitating e-wallet interoperability in Asia. Instead, Tenpay Global has a “1+1+1” model: the first 1 represents the WeChat (or “Weixin”) ecosystem, the second 1 represents global payment partners and the third 1 stands for the concept of an “overseas lifestyle services platform.” Tencent officially unveiled this concept in June at Money 20/20 Europe.

Parsing Tencent’s press release about the 1+1+1 concept, one sentence stands out: “This comprehensive approach aims to meet the cross-border needs of global Chinese communities or Chinese companies,” which is attributed to Royal Chen, Vice President of Tencent Financial Technology.

It would seem that Tencent recognizes the limitations of its ecosystem and intends to maximize opportunities within a niche market – albeit a significant one. After all, Tencent has more than 1.3 billion users of WeChat/Weixin in 50 countries and regions.

Betting On Inbound Remittances

Looking ahead, we expect that the most promising part of the Tenpay Global suite of products will be inbound remittances. Outbound is a challenge because of China’s capital controls. Tencent is not licensed to process outbound cross-border payments and needs to find partners that are if it wants to focus on this business. The use cases thus far are limited as well. For instance, in January 2022, Tencent invested in Easy Transfer, a startup that aims to simplify tuition payments for the many Chinese students who choose to study overseas.

When it comes to inbound remittances, Tencent faces far fewer obstacles, and can draw on the massive WeChat user base in its home market. It also benefits from the fact that China was the world’s No. 3 inbound remittance market in 2022, receiving $51 billion.

Ultimately, the more diffuse nature of Tencent’s fintech ecosystem compared to Alipay’s means that lacks a powerful, unifying concept other than being geared towards Chinese users. While it will not be easy for either of the Chinese fintech giants to build an alternate payments rail outside of their home country, Alipay has a better chance because of its clear focus on improving interoperability among e-wallets in Asia.

With its 1+1+1 concept, Tencent seems to be trying to put too many disparate ideas under one umbrella. The company might want to rethink some of its overseas investments, especially in Europe, and determine whether they can serve to boost inbound remittances to China, where Tencent is best suited to vie for market share.