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WeChat: the real Beast from the East

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I've written a lot about Alibaba, Ant Financial and Alipay. This is not because I endorse or want to advertise the company, but because they are the first company to have embarked on a global financial inclusion strategy and have been marking it happen. Ant Financial is now some of the technology power behind PayTM in India, GCash in the Philippines, Kakao Pay in South Korea, Ascent Money in Thailand and more.

However, Alibaba has a big rival called Tencent who have also been operating a payments system for several years called WeChat Pay. WeChat is China's Facebook, and have nearly a billion users, a real heavyweight. Now Tencent is also going global, and one person who has been watching them closely is Matthew Brennan of China Channel (WeChat ID: Yowdy-CQ; Twitter: @mbrennanchina; LinkedIn; Podcast: ChinaTechTalk).

Matthew regularly posts updates on Tencent - the most recent one is fascinating - and has kindly provided this overview of the real Beast from the East (OK, poetic licence, but it works for me).

WeChat: the real Beast from the East

China's tech behemoth Tencent is still a bit of a mystery to the outside world despite having (as of writing) a valuation of over half a trillion dollars, topping the world’s other social giant Facebook. Its net income surged 69% this year to RMB 18 billion thanks to its biggest money-maker online gaming. Today, all eyes are on Alibaba's biggest rival as the company is making its moves on the international market.

The reason why Tencent has not gained more attention lies in part due to its distinctive low-key approach. Tencent founder and CEO Pony Ma (Ma Huateng) is in many ways the opposite of Alibaba’s founder Jack Ma (no relation) who rarely passes an opportunity to speak to the press or perform quirky publicity stunts. Tencent, on the other hand, is seen as more reserved, standing on the sideline and carefully calculating its moves.

Tencent first made their fame with a messaging program similar to ICQ called QQ which at a certain time was probably installed on every computer in China. At first glance, QQ is a prime example of what Tencent’s critics have argued: that they are mere copycats. However unlike ICQ that has gone obsolete, the messaging platform continues to thrive among China's youth. As Tencent’s founder Pony Ma once said in 2011:

“In America, when you bring an idea to market, you usually have several months before competition pops up, allowing you to capture significant market share. In China, you can have hundreds of competitors within the first hours of going live. Ideas are not important in China – execution is.”

Today, twenty years after its founding, the company that started as a copycat is now among the most innovative firms in the world. The best example of this is the jewel of Tencent’s crown – WeChat, a messaging app so popular that it’s now closing in on a billion users (980 million).

WeChat is much more than just a Chinese version of WhatsApp or Facebook. The brainchild of equally low-key Allen Zhang, WeChat has become “the everything app” used for messaging, calls, booking restaurants, finding information, ordering a taxi, or tuning into your favorite music.

WeChat users now spend more than four hours a day within the app but despite its massive influence on everyday life in China, the app is just one part of Tencent’s empire. Tencent, along with Chinese peers such as Alibaba, have begun to branch out into a wide variety of sectors and more aggressively than their Western rivals, GAFA.

Besides creating an online mobile and PC gaming empire, the company has opened up AI and big data labs and build up content powerhouses such as China Literature which spun off to become one of the best IPOs of 2017. Its products cover a wide range from music and video streaming to mobile apps and healthcare platforms. Tencent secured its place in e-commerce by taking a stake in online shopping giants JD and Vipshop, bolstered China's thriving O2O sector by investing in Meituan Dianping, joined the bike sharing frenzy by jumping into Mobike, and backed China's Uber-killer DiDi Chuxing.

Yet, Tencent's appetites do not stop in China. The company has invested in Snapchat, Spotify, and Tesla and was once the main contender for purchasing WhatsApp before Facebook snatched it. Currently, its hottest target is retail where Tencent has made significant investments during the first month of 2018 including Carrefour China and Dalian Wanda.

The company has eight divisions which aside from the WeChat Group headed by Zhang include Social Networking, Online Media, Interactive Entertainment, Mobile Internet, Corporate Development, and Technology and Engineering.

Mobile payments is another area where Tencent is thriving. WeChat Pay, a mobile payment system integrated into the app, holds 40% of China’s whopping US$12.77 trillion mobile payment market. Kickstarted by China’s virtual red packets exchange that supplanted the tradition of giving monetary gifts during Chinese New Year, WeChat Pay has seen impressive growth since its launch in 2013. Its monthly offline commercial transactions jumped 280% year over year in 2017 while social payment transactions grew 23%. Along with Alibaba's Alipay, the service is making cash and plastic obsolete in China.

WeChat Pay falls under the umbrella of Fitgroup, Tencent’s financial tech division within the Corporate Development Group headed by Tencent’s President Martin Lau. Lau parachuted into the company from Goldman Sachs in 2005 after working with Ma Huateng on listing Tencent on the Hong Kong Stock Exchange the previous year.

Fitgroup has been busy developing other fintech tools. Among Tencent's arsenal is the newly-minted mutual fund platform Lingqiantong, meaning ‘balances made smart’, that hopes someday to rival the world's biggest money market fund Alipay’s Yu’e Bao. The company also offers a wealth management service Licaitong, which means wealth management made smooth and is trialling its own online credit rating score system similar to Alibaba’s Sesame Credit.

One of its latest forays is into the insurance business: Tencent has received approval for its Weimin Insurance Agency in October last year and is making preparations for launching medical insurance WeSure which will available at a tap on the phone through WeChat's app.

Tencent has also made some early moves to capture some of WeChat Pay's massive audience and convert them over to WeBank, China’s first private commercial internet bank established in 2014 in which Tencent owns 30%. Alipay also have their own rival online bank MYbank.

Both Alipay and WeChat Pay are currently in a middle of an ongoing battle to win over retailers across China, burning huge amounts in subsidies to build usage habits and lock in users for the long term. But their appetites are much larger than just China. WeChat Pay has focused on following Chinese tourists abroad spreading to 25 countries so far but besides entering travel hot spots, it has also made deals with a variety of global payment services such as Ayden and CITCON and has invested in Airwallex.


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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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