Internet & Tech

A golden thank you

Bytedance gets a precious payments licence from China’s central bank


Zhang Yiming: some better news

The clock is ticking down to the September 20 deadline from Washington to force the sale of TikTok’s American business. On Monday TikTok’s parent Bytedance said it had submitted a proposal to the US government to continue operating its business in the United States. Software giant Oracle confirmed in a statement that it was “the trusted technology partner” set to work with Bytedance. Microsoft withdrew its interest in the sale a day or two earlier, although its bidding partner Walmart says it still wants to invest in TikTok via the Oracle deal.

Details of the proposed deal are sketchy (including the price Oracle might pay for its stake, or whether US entities must have majority control). But according to the Wall Street Journal, TikTok will move American data onto Oracle’s cloud infrastructure while Bytedance’s AI algorithms – subject to a new export ban imposed by Beijing last month (see WiC509) – will stay under Chinese control.

“I heard they’re very close to a deal… we’re going to make a decision pretty soon,” Trump told reporters on Wednesday, with Treasury Secretary Steve Mnuchin telling CBNC this week that TikTok is committed to creating a global HQ in the US that could generate 20,000 jobs.

What’s clearer is that Bytedance’s prospects look much rosier back at home in China, after receiving a major regulatory boost from the government. Last week the company confirmed that it had received a coveted licence as an online payment provider after getting the green light to take over Wuhan-based UIPay, which previously served as its payment partner.

These licences are a precious commodity: the central bank has given out no new ones since 2016. According to Time Weekly, there were still about 238 third-party payment licences in existence as of August last year, although the number of payment operators has been dropping as smaller players are outmuscled or acquired by e-commerce majors such as Alibaba, and Meituan.

Bytedance’s new licence opens the way for a fuller move into the e-commerce business, as well as a way of creating new revenue streams from the millions of users that have already signed up to its existing apps. It will also try to challenge the leading giants in the payments arena, where Alipay and WeChat Pay have established a dominant presence.

“Pay­ments are the en­try point for com­mer­cial in­fra­struc­ture, and the cre­ation of fi­nan­cial added-value ser­vices re­quires hav­ing your own sticky pay­ments cus­tomers, in or­der to be able to con­vert them into sticky fi­nan­cial cus­tomers,” Wang Pengbo from Anal­sys, told Na­tional Busi­ness Daily.

Some also view the licence approval as a sweetener from the government, which has directed Bytedance not to sell the key AI technology underpinning TikTok to its American suitors. That prohibition has scotched the chances of a fuller sale – to the possible financial detriment of its shareholders.

Bytedance reported about Rmb140 billion ($20.6 billion) in revenue last year. It derives more than 80% of its income from advertisements on Douyin, the Chinese version of TikTok. Only a handful of China’s internet firms have grown their revenues above the Rmb200 billion mark (which Bytedance is forecasting it will hit this year). And all of them – the likes of Alibaba, Tencent, and Meituan – have a sizable presence in the e-commerce sector.

Bytedance wants a bigger bite of that market too. It has already positioned itself as a challenger to Tencent in offering an all-encompassing platform where people can find almost all of their entertainment needs online. Now with its new licence, it is set to take on Alibaba more directly as a marketplace where they can buy all of their goods too.

No one could accuse Bytedance’s founder Zhang Yiming of lacking pluck as he squares up to Trump, Tencent and Alibaba – a powerful trio of foes…

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