Mobile payment licences are a relatively scarce resource in China. At present there are 237 in active status, thanks to a drought in new issuance since March 2015, and dozens revoked in conjunction with the clampdown on the once unruly peer-to-peer lending market. The only way to join the e-payment market – thus far dominated by Alibaba and Tencent – is to take over companies that are in possession of such a coveted asset.
Huawei did just that on December 21. In a quiet move the tech behemoth acquired a 100% stake in Sharelink Network from a fintech company. The deal was only made public last week when a new entry on the nation’s company registry revealed the licence holder’s identity.
According to CBN, a newspaper, Sharelink Network was granted the licence in 2014. Instead of developing rival offerings to Alipay and WeChat Pay, Sharelink Network focused on two other areas in the payments ecosystem.
One is merchant aggregation, which helps sellers to accept different payment modes without having to set up separate accounts with banks or payment service providers. The other is settlement services that target brokerages, virtual banks and other online financial services platforms.
Huawei’s deal came at a time when China’s government is ramping up its efforts to shake up the digital payments market. After scuppering Ant Group’s jumbo initial public offering in November last year, financial regulators including the People’s Bank of China (PBoC) introduced a slew of rules to reshape the playing field. The policy shift saw almost all of China’s major internet companies including Bytedance, Meituan, Pinduoduo and Kuaishou bid for firms that hold a payment licence (see WiC527).
Less about breaking the Alipay-WeChat duopoly (where the pair respectively held 55.6% and 38.8% of the digital payments market as of June last year), Huawei’s move is more about growing the influence of its e-wallet Huawei Pay, noted 21CN Business Herald. Launched in 2016, Huawei Pay utilises UnionPay’s network and Near Field Communication (NFC) technology to facilitate payments made through point-of-sale (POS) terminals.
Commanding 40% of China’s handset market in 2020, the Shenzhen-based company hopes to drive millions of users to its payment platform. Part of the adoption will be driven by users making purchases on AppGallery, an app store that Huawei has ploughed billions of yuan into (having been barred from Google’s Android app store).
Huawei Pay also serves as the starting point for Huawei’s consumer finance ecosystem. Taking its cues from rivals Xiaomi and OPPO, Huawei could expand its services to include micro-lending, with the loans then used to buy a portfolio of smart home appliances that run on its self-developed HarmonyOS.
Perhaps more significant is Huawei’s aspiration to prepare for the rollout of China’s sovereign digital currency, also known as the Digital Currency Electronic Payment or DCEP (see WiC502), reported Jiemian, an online news platform. During the launch of its Mate 40 phone series last October, Huawei said that its flagship 5G device was the first smartphone with an inbuilt wallet supporting DCEP.
So as to have the ground-breaking digital currency ready for the 2022 Winter Olympics in Beijing, the PBoC has distributed Rmb200 million ($30.4 million) worth of DCEP in pilot zones like Shenzhen, Suzhou and Beijing since last April. Trials for cross-border use are also underway in Hong Kong, Thailand and the United Arab Emirates.
The plan also saw SWIFT, a global financial messaging platform, set up a joint venture with the PBoC in February, fuelling speculation that the China is building a yuan-denominated system for cross-border payments in a bid to counter the influence of the US dollar in the international markets.
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