China has reportedly asked Tencent’s WeChat to reduce its mobile payments market share as the country begins piloting its digital currency. Alongside Ant Group’s Alipay, WeChat dominates China’s mobile payments landscape in a country where digital payments are the norm.
WeChat holds an estimated 3:2 market share lead over Alipay, with $12 trillion in mobile payments in China as of March 2024. According to Nikkei, the government directive to WeChat is focuses on in-person payments, where users scan QR codes to make purchase items at retailers rather than through e-commerce apps.
While China didn’t specify WeChat’s target market share, Tencent has indicated it isn’t actively pursuing further mobile payments expansion.
Pushing the Digital Yuan
This directive was purportedly issued to slow down the big tech monopolies that have dominated China’s payments landscape. Though there are around 185 companies supporting mobile payments in the country, Alipay and WeChat are estimated to control 90% of the market.
While it’s a plausible explanation, speculation is brewing that the Tencent decree is part of larger-scale initiative by the Chinese government to drive the widespread adoption of the company’s central bank digital currency (CBDC), the digital yuan.
China has longed pushed its CBDC as an alternative to WeChat and Alipay, but those efforts have been largely fruitless. This latest directive comes after the country recently announced it will pilot the digital yuan for its first use outside mainland China. The digital yuan has been launched in Hong Kong and will fully support cross-border payments.
Super Apps
Despite China’s efforts, the digital yuan hasn’t caught on because its applications are limited, and it doesn’t accrue interest like other funds can. The CBDC was issued in 2020, and even though WeChat has supported the digital yuan for over a year, it has yet to make an impact with users.
What’s more, the digital yuan is unlikely to replace WeChat and Alipay because these super apps have massive ecosystems that are designed to include every aspect of users’ lives. The all-in-one functionality is likely to keep WeChat’s 1.4 billion monthly active users on the platform, regardless of the government’s initiatives.
