Internet & Tech

Tipping point

How Tencent and Apple have squared off in mobile payments spat


When Steve Jobs unveiled the iPad in 2010, the device was initially ridiculed online. Catty observers suggested Jobs had run out of ideas and was just pitching six iPhones stuck together. But it was a pitch that resonated with both book and news publishers who, eager for new revenue streams in the digital age, quickly released iPad apps.

The mood changed in 2011 when Apple introduced new regulations which banned publishing apps from offering subscriptions or purchases that linked to external platforms. All purchases had to be processed through “in-app payment” (IAP) with Apple taking 30% of the revenue. Though publishers were infuriated with the new arrangement, most had little choice but to follow the Apple diktat.

Last month WeChat, the multi-function messaging service run by Chinese internet giant Tencent, faced a similar dilemma after Apple demanded that transactions made using WeChat’s “Tip” button be processed as an IAP, syphoning 30% of the amount to Apple. In a show of defiance, WeChat decided to simply remove the service rather than give Apple a cut.

The “Tip” function allows WeChat users to transfer money to authors of articles and developers of emojis as a reward for their creations. In the past this function has been tapped for charitable purposes, such as when one man managed to raise over Rmb2 million ($289,855) from WeChat users to support his sick daughter.

But on April 19 WeChat announced that it would be removing the Tip function from versions of the app that runs on iOS – blaming Apple’s “new regulations”. Initially the company suggested it would be replacing the “Tip” button with a QR code for users to send money in a similar way. Six hours later, it retracted this idea altogether.

According to Time Weekly, Apple responded to the spat by saying: “WeChat can also choose to use IAP to allow users to show appreciation to the accounts they like. Just as we offer this option to all other app developers, WeChat only needs to use IAP to continue [the Tip service].”

WeChat users with iPhones are angered. Lin Yu, a Beijing-based lawyer, told CBN he believes that Apple’s “despotic conditions” are violating China’s anti-trust laws, specifically those prohibiting “tied sales” and “attaching unreasonable conditions to transactions”.

Others said that the Tip function doesn’t violate Apple’s rules. The clause that Apple claims WeChat has breached prohibits apps from including “buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than IAP”. WeChat’s supporters posture that Tips shouldn’t be categorised as a purchase, because the content can be viewed freely.

This is the second time this year that the most valuable tech firms from China and the US have locked horns. Tension between the duo first surfaced in January when WeChat launched an in-app feature allowing users to access third party services. This just about toed the line in which Apple prohibits apps – such as WeChat – from creating their own rival app stores (see WiC351).

WeChat’s latest show of strength could be a real challenge to Apple’s authority, as the iPhone’s share of China’s smartphone market dwindles (in its quarterly results announced this week, sales in China were down 14% year-on-year). WeChat, on the other hand, is tightening its grip: the platform recently surpassed Facebook in terms of daily usage worldwide, with over 800 million users spending an average of 66 minutes a day on the service.

Apple’s new rule on the Tip function is also said to be another effort to get people in China to use its ApplePay service, which has gained little traction in the world’s biggest mobile payment market. The Financial Times reported this week that Tencent is growing fast in this arena too. Its Weixin Pay service had upped its share of Chinese mobile payments to 37% by the last quarter of 2016 – at the expense of market leader AliPay’s reduced level of 54% (in the third quarter of 2015 the shares were 16% and 71% respectively). The FT also says that Weixin Pay is now usable at all 2,600 Starbucks in China – except the one on Alibaba’s Hangzhou campus.

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