For thousands of years, Chongqing proved to be the toughest territory for any external power to seize. Surrounded by steep mountains, and located at the confluence of the Jialing River and Yangtze River, it took 36 years for the bellicose Mongolians to conquer the city during the thirteenth century. It was also the last bulwark against Japan’s military and survived five years of terror bombing.
But in the battle for Chinese digital wallets, it’s not Chongqing but Hong Kong that looks like the fortress city that needs to be cracked – at least in the eyes of tech giants, Alibaba and Tencent. Their task is all the harder thanks to the ubiquity of the city’s Octopus card – a contactless stored-value payment system that was originally designed only for use on the subway but can now be used everywhere from supermarkets to car parks.
By comparison Alipay and WeChat Pay have only been allowed to operate in the city since August 2016. And they have needed to play catch-up, given their flagship services – Alibaba’s e-commerce platform Taobao and Tencent’s social media colossus WeChat – are nowhere near as entrenched in daily life as on the mainland.
It is against this backdrop that the two tech giants have opted to join forces with local service providers. On January 17 Ant Financial, which operates Alipay, announced its purchase of a 20% stake in OpenRice, an online-to-offline eatery portal that is similar to Koubei (meaning word-of-mouth reputation) which Alibaba has backed on the mainland since 2015.
A go-to restaurant guide for many Hongkongers, OpenRice connects 24,000 outlets with diners. Its mobile application has received 5 million downloads since its launch and ought to lift Alipay’s usage on two fronts. For one thing, rebates and promotions offered on the app will lure foodies to use Ali’s payment system. For another, caterers accepting Alipay will have access to a B2B service called OpenRice Biz, which offers other incentives. (A next step might be to add food deliveries to the mix using the logistics capability of Alibaba-invested GoGoVan – see WiC379.)
The push will likely dovetail with an alliance forged with Li Ka-shing’s CK Hutchison Holdings. That deal, struck in September, has enabled Alipay to tap the vast customer base of Hong Kong’s richest man, most significantly his retail empire of supermarkets, pharmacies and electronics shops.
Alipay has also gone after other targets turned off by Octopus’ relatively high fees. For instance, of the 18,163 taxis in Hong Kong, over 1,500 have signed up for Alipay, according to the South China Morning Post.
This move prompted its archrival Tencent to roll out a similar services in October, garnering around 1,000 taxi clients by the end of 2017 (see WiC391 for how the two tech companies compete across the board in China). Tencent has also made headway through local partnering, in its case striking a deal with the city’s railway monopoly MTR Corp (the entity behind the Octopus). This arrangement lets travellers use WeChat’s QR-code to buy train tickets at stations bordering Hong Kong and Shenzhen such as Lok Ma Chau and Lo Wu.
Alipay has of course tracked its rival’s moves closely, except for in one area: remittances. Its blocked takeover of MoneyGram International in the US (see WiC393) means that Tencent, which launched WeRemit in Hong Kong in October, is a step ahead helping Filipino and Indonesian domestic helpers wire money digitally back home.
Here Tencent faces competition from TNG Wallet, a local e-payments start-up that got a licence in 2016 and has focused from the outset on the digital remittance needs of ethnic minorities. Now its founder Alex Kong recognises he faces a major threat from the bigger players (indeed while his firm is unlisted, Tencent and Alibaba have a combined market value of close to $1 trillion). As Kong told a forum in October he now faces a fierce battle with the cash-rich Alibaba and Tencent both in remittances and point of sale payments: “[Service providers] with deep pockets enjoy a competitive advantage as they can provide more rebates to customers and merchants when trying to gain market share.”
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