 "alipay, wechat, digital payments, china")
China is planning to introduce a new mobile payment regulation aimed at reducing the market share of Tencent Holdings' WeChat app, similar to efforts made by the National Payments Corporation of India to curb Google Pay and Phone's growing dominance in the market. According to Nikkei Asia, the country's regulators have directed Tencent to decrease WeChat Pay's dominance in the mobile payment market, particularly in in-person payments made by scanning QR codes.
While the specifics of the numerical target have not been disclosed, a source familiar with the matter told Nikkei Asia, "WeChat is not targeting user expansion, and it is very cautious about the potential risks of growing too big."
Duopoly of WeChat Pay and Alipay in China
Despite China's vast cashless society and the presence of around 185 non-bank payment institutions, the mobile payment market is predominantly controlled by WeChat Pay and Ant Group's Alipay. WeChat Pay is particularly notable for handling a higher volume of small-value transactions compared to Alipay.
WeChat's marketing team is smaller than Alipay's, and it has been offering fewer payment discounts than before. However, the app remains widely popular, especially among older users in remote areas who may not have Alipay accounts.
As of March, WeChat had 1.36 billion monthly active users.
Comparison with India's UPI rules on Google Pay and PhonePe
India has also taken steps to address the dominance of major players in its Unified Payments Interface (UPI) ecosystem. Earlier this year, the National Payments Corporation of India (NPCI) held meetings with smaller UPI players to discuss ways to promote their growth and reduce the dominance of apps like Google Pay, PhonePe, and Paytm, which control over 90 per cent of UPI transaction volume and value.
Since Paytm began facing scrutiny by the Reserve Bank of India (RBI), PhonePe and Google Pay have filled the gap in the Indian market, with PhonePe's share of UPI payments rising to 48.3 per cent in April 2024 from 37 per cent in April 2020. In April of this year, Google Pay's share declined to 37.4 per cent from 44 per cent, according to NPCI data. The two payment apps together processed 11.5 billion transactions in April.
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The NCPI was also looking to introduce a 30 per cent market cap on payment apps, however, this is yet to materialise.
Financial implications of market-restriction on payment apps
Mobile payments in China are a lucrative sector. In the first quarter, total mobile transactions through third-party service providers reached 92.38 trillion yuan ($12 trillion), with QR code transactions accounting for 15.59 trillion yuan, according to Analysys, a Beijing-based consultancy.
China's move to curb WeChat Pay's market share highlights the ongoing efforts by global regulators to balance market dominance and foster competition. As mobile payments continue to grow, China and India seek to ensure a more level playing field for smaller players in their respective digital payment ecosystems.
