Mobile money

Many of WiC’s readers will be familiar with the Chinese new year tradition of giving friends, family and acquaintances small red envelopes containing monetary appreciation. In Cantonese these gifts are known as laisee (good luck) or in Mandarin hongbao (red packets). Traditionally, the packets are a way of earning “face”. But China’s tech giants hope that the hongbao will bring something else: users.

In 2013 WeChat launched its mobile payment service WeChat Wallet to take on Alibaba’s Alipay. But the rivalry really took root in 2014 when WeChat fired the first volley of what is now known as “the red envelope wars”.

In a move that Alibaba boss Jack Ma has referred to as ‘the Pearl Harbor attack’, WeChat announced it would give away millions in renminbi to WeChat Wallet users as electronic hongbao gifts in a bid to lure more customers to its payment service (see WiC272).

This year Alipay launched its own holiday offensive, trying to take back more of the social media territory that WeChat now dominates. The manoeuvre involved a game called “Collect Five Fortunes” in which users had to collect different digital tokens to share in a payout of Rmb215 million. In order to collect the tokens users could either convince 10 of their friends to join Alipay (for which they got three tokens); trade tokens with friends to complete a full set of five; or watch the CCTV Spring Festival Gala and hit an in-app “cheer” button when instructed to do so by the TV hosts.

To support the Spring Festival gimmick Alibaba paid Rmb269 million ($41.4 million) to replace WeChat as the official sponsor of CCTV’s annual show (see WiC313). Over 100 million users joined Alipay in the lead-up to the new year festival, and 790,000 people shared the Rmb215 million giveaway, receiving just Rmb271.66 each, Huxiu.com reports.

WeChat tried new tactics of its own to woo customers. One effort was a new feature that automatically blurred photos posted by users on their WeChat accounts. To have the image revealed, friends had to send the user an e-hongbao. The ploy was greeted with a mixed reception, some enjoying the novelty and others affronted by it (although not too dismayed – a record 8.08 billion e-hongbaos were sent through WeChat on February 7 alone).

WeChat courted greater controversy shortly after the Year of the Monkey had begun when it announced that as of March 1, its users would incur a 0.1% fee each time they “withdraw” funds from its mobile wallet, i.e. redeposit money from the payment app back into their bank account. In a statement, Tencent said the fees were designed to “cushion rocketing costs” of managing its payment system, although others suggested the move was more designed to deter customers from taking money out of the WeChat ecosystem and returning it to the banks.

And now two other players have joined China’s mobile payments war: Apple and Samsung. Apple released its Apple Pay function on February 18 in partnership with UnionPay, gaining 10 million users in an hour and 40 million by the end of the day. But it is paying a price for entering the market – the tech giant has agreed with its 19 supporting banks to reduce the transaction fees it charges them to 0.07%, less than half of the level in the US, according to Caixin Weekly.

Samsung also expanded its own mobile payment system into China on Wednesday. Like Apple, it uses Near Field Communications (NFC) technology embedded in handsets, which transmits data to point-of-sale (POS) receivers at participating merchants. But both systems are currently limited to users of top-range phones, whereas

Alipay and WeChat Wallet can be used with almost any smartphone. The Chinese firms are also offering a wider range of bill payments, O2O services and investments, not just point-of-sale transactions. With Alipay already holding about 70% of the mobile payment market, the newcomers might find this a formidable battlefield.

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