Tencent Holdings Ltd.’s strategy for expanding WeChat Pay globally is pretty straightforward: Follow the (tourism) money.
Grace Yin, operations director of WeChat Pay’s international business, summarized Tencent’s approach at the RISE Conference earlier this month in Hong Kong:
If a place has a Chinese tourist, then this place is our target.
It’s a smart strategy. Simple, elegant and actionable with WeChat Pay now accepted in 25 countries.
But it’s also decidedly unambitious. The focus in those 25 nations is solely on the merchant side of the equation — to accept money from Chinese travelers.
“We don’t have a plan in the next three years to do a payments wallet outside of China, except Hong Kong and now also Malaysia,” Yin told me. My first thought: What a wasted opportunity.
I understand her thinking. WeChat is a decidedly Chinese phenomenon. While it’s ubiquitous and even crucial to daily life there, it’s the No. 1 chat app in only three countries, according to the annual Global Digital report published by WeAreSocial and Hootsuite. WhatsApp is the leader in 128 countries while Facebook Messenger reigns in 72. Even Viber is more widespread.
But those apps don’t offer payments in all those countries. Although WhatsApp and Facebook Messenger have more users, WeChat’s depth of services — including bookings, bike rentals, payments, MiniApps and news — make it the world’s most powerful.
Facebook Inc. has squandered its $19 billion WhatsApp purchase of four years ago by doing nothing to expand its feature set. (Facebook does at least see the potential, having decided to dip its toe in the water by rolling out WhatsApp Pay in India, a project that recently hit some hurdles over privacy concerns.) Meanwhile, its own Facebook Messenger app has barely innovated.
Tencent’s lack of interest in taking WeChat Pay to a broader market is based upon the fact that the rest of the world is relatively small.
Head office staff say only 20 percent of the app’s users are registered outside of China, according to Matthew Brennan, the founder of China Channel, a WeChat consultancy. That would put the number at about 200 million, a figure I have trouble believing. By analyzing survey data from Global Digital and after discussions with other industry folk, I would put the figure at more like 100 to 150 million. I’m willing to be corrected if someone has reliable data they can share with me.
I asked Tencent for comment, and they declined to provide a geographical breakdown. I think this is a mistake, and part of Tencent’s insular mentality toward WeChat, WeChat Pay and their potential.
Having 100 million global chat users is a golden opportunity, not an inconsequential market. Apple Pay only has 127 million, or 16 percent of iPhone users, according to Loup Ventures’ Gene Munsters. And that’s not even a wallet service, which allows person-to-person transactions. The recent introduction of Apple Pay Cash in the U.S. shows that even Cupertino sees the potential for direct P2P money transfers. Japan’s Line Corp. has jumped on the bandwagon, and it’s a good bet Ant Financial will try to make AliPay more global.
One objection I’ve heard about WeChat Pay spreading its wings concerns privacy and Tencent’s cooperation with Chinese authorities. But user habits, even after the Cambridge Analytica scandal, tell me people don’t care that much (even if they should). And when presented with a chat app with better functions, such as a mobile wallet, I think many will switch. So WeChat’s 100 million to 150 million non-China users today could climb as high as 250 million in short order if Tencent offers the same kind of functionality as the domestic version.
One day, chat plus wallet will be as obvious a combination as mobile phone plus camera. Tencent did a phenomenal job making WeChat Pay ubiquitous in China. It’s squandering that lead if it refuses to have global ambitions.
WeChat is known as Weixin in Chinese when referring to the domestic product. WeChat Pay is also known as Weixin Pay domestically.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.
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