Zhang Yiming opened up a new battlefield and aimed at WeChat Alipay

In the past period, Byte Feishu has laid off thousands of employees, and the game business has also been restructured and sold. However, while other businesses are shrinking vigorously, Douyin Pay is still making rapid progress.

Recently, Hailian Jinhui, an A-share listed company, announced that it plans to transfer its subsidiary UMF to Tianjin Tongrong, a byte-based company, with a total transaction amount of about 1.4 billion yuan. After the transaction is completed, Douyin Pay, a subsidiary of Bytes, will be licensed for offline acquiring business.

The so-called offline acquiring can be simply understood as consumers swiping bank cards or scanning QR codes to pay in offline supermarkets and convenience stores. The relevant person in charge of Douyin payment said that this transaction is to support offline transaction scenarios such as life services, and provide users and merchants in the Douyin system with a more convenient payment and service experience.

It is worth noting that the main company of Byte's acquisition is indirectly controlled by Zhang Yiming and Zhang Lidong, of which Zhang Yiming holds 99% of the shares. The importance that bytes attach to this license plate can be seen.

Zhang Yiming

In August 2020, Byte obtained a payment license through an acquisition, and five months later launched Douyin Pay, but the business scenario was limited to online. Now, with the completion of the offline acquiring license, the Douyin payment business map is more neat.

After years of development, the domestic mobile payment market has formed a two-way pattern of WeChat Pay and Alipay, which together occupy more than 9% of the share. In general, WeChat Pay has an advantage in offline scenarios, while Alipay is better online.

With a huge market of 900 million users, the two major payment tools bring huge returns to Tencent and Ant every year.

According to the financial report, in 2023, the revenue of Tencent's financial technology and enterprise service business will reach 203.9 billion yuan, equivalent to 1/3 of the company's total revenue. In addition, according to public information such as the All-China Federation of Industry and Commerce and Alibaba's financial reports, the Ant Group behind Alipay will have a revenue of nearly 180 billion yuan in 2022 and an annual book profit of about 31.2 billion yuan. For comparison, Byte's revenue in 2023 will be about 120 billion US dollars (about 868.1 billion yuan).

Byte launched Douyin Pay in January 2021 and sponsored CCTV Spring Festival Gala red envelopes for promotion. In the past three years, Douyin Pay has been fully integrated into e-commerce scenarios such as small stores and live broadcast rooms, while Douyin has gradually diluted the full platform exposure of WeChat Pay and Alipay, and since the second half of last year, it has partially closed the WeChat payment function in scenarios such as group buying.

However, Douyin Pay has not become the third pole of mobile payment.

From the perspective of user volume, WeChat Pay and Alipay have both exceeded 1 billion, but the slogan of Douyin Pay is still "more than 100 million people are using". In terms of scenarios, in addition to the absence of offline, Douyin Pay also lacks a sense of presence in online transactions outside the byte system.

After winning the offline acquiring license, Douyin Pay cuts into the offline scene, helping Douyin Life Service improve the infrastructure and experience, while also broadening the user circle and usage scenarios, and increasing the cost of wrestling with WeChat Pay and Alipay.

In addition to earning transaction service fees, the greater value of payment services lies in serving as a traffic portal and connecting financial services. Previously, Douyin has launched a variety of personal credit businesses such as monthly payment, assured borrowing, and co-branded credit cards. After entering the offline, Douyin Pay is expected to attract and explore more consumers with credit needs, and cultivate new cash cows for Douyin and even the entire byte.

However, payment and its related financial business are also a must for Tencent and Ant. In the new change of "competition and cooperation" as the keynote of the industry, Byte enters the payment battlefield and inevitably competes with the two giants, and another payment war is about to start.

A

Douyin Pay has entered supermarkets and convenience stores, giving Douyin life services options other than WeChat Pay and Alipay.

The local life business is one of the main investment directions of Douyin. Backed by the short video content ecosystem, Douyin Life Service started in 2020, and its GMV (gross merchandise value) has reached 77 billion yuan in 2022, and according to LatePost, this figure will increase to more than 100 billion yuan in the first half of 2023, with a target of 290 billion yuan for the whole year.

According to data released by Douyin, the total transaction volume of Douyin's life service platform will increase by 256% in 2023, with more than 4.5 million stores settled in it, covering more than 370 cities.

Behind the rapid growth of transaction volume is a large number of online and offline transactions every day, as well as huge transaction service fees.

In online links such as purchasing group purchase coupons and preferential packages, Douyin has set its own payment service as the first choice, Alipay is only one of the alternatives, and WeChat payment has been excluded from group buying and other scenarios, to a certain extent, avoiding "fertilizer water flowing into outsiders' fields".

However, after arriving at the store, in addition to using group purchase coupons, consumers often buy dishes, goods, services, etc. other than set meals, and if they are satisfied, they will re-enter the store for repurchase. For these offline transaction scenarios that extend longer and have a deeper water level, Douyin previously lacked relevant business qualifications, and consumers could only choose other payment methods.

Douyin life service made a big cake, but it was cut off by WeChat payment and Alipay, and it suffered a lot.

This unavoidable interest distribution pattern is reflected in the performance of byte rivals. Tencent's 2023 financial report pointed out that the revenue of fintech services maintained double-digit year-on-year growth in the previous year, due to the increase in commercial payment activity, as well as the growth of wealth management services and consumer loan services.

On the other hand, as a leader in the local lifestyle industry, Meituan launched online and offline payment services early in an effort to avoid being "cut off" by third-party payments. Now, Byte has spent 1.4 billion yuan to acquire an offline acquiring license, and Douyin has the ability to follow Meituan and take the offline payment scene back into its hands.

By controlling the offline payment scene, Douyin can not only earn transaction fees, but also cut the cake of payment scenario marketing.

Since the development of mobile payment, WeChat Pay and Alipay have developed a large number of marketing methods, and attracted merchants to participate in them through platform subsidies and other means. For example, merchants can choose to display preferential benefits on the payment results page to attract consumers to receive coupons and repurchase, or display merchant mini-programs and communities to precipitate consumers to the private domain. If it is connected with the personal credit system such as credit scores, merchants can also stimulate consumers to appropriately consume in advance, which is quite valuable for merchants with high customer unit prices.

In fact, in the early years, when WeChat Pay and Alipay competed for offline merchant resources, they both regarded marketing capabilities as one of their main selling points.

For example, Alipay launched "money-making red envelopes" in 2017. When users consume in offline supermarkets, they can receive red envelopes by scanning the red envelope code, and merchants will receive platform rewards. The red envelope code is not only Alipay's action of attracting new customers on the B-end and C-side, but also a visual demonstration of its marketing capabilities, and related activities have continued to this day.

With the continuous promotion of the platform, many offline merchants have gradually invested their marketing resources in WeChat Pay and Alipay. After Douyin Pay entered the game, there are many ready-made "jobs" for reference, which can refer to the opponent's gameplay and improve the marketing function while attracting merchants to switch positions. In particular, those merchants who have stores on Douyin can use Douyin Pay to connect online and offline transaction experiences and marketing actions, which can help improve the input-output ratio.

However, most businesses are still tightening up on marketing spending. In the offline scenario, the more merchant marketing resources Douyin Pay gets, the fewer WeChat Pay and Alipay may be. If Douyin Pay attacks in a big way, the two giants may not sit idly by.

B

In addition to mobile payment, Douyin is also entering a broader Internet finance track, which is also an area that Tencent and Ant value.

As early as 2018, Byte launched "Rest Assured Borrowing" to test the waters of small online loans. A few years later, Douyin took over the byte financial business and launched a series of products one after another, which were gathered in the Douyin app "My Wallet".

Open "My Wallet", and "Rest Assured Borrowing" and "Douyin Monthly Payment" for personal microfinance scenarios are in a prominent position. Parallel to this is the Douyin co-branded credit card, with partners including Bank of Communications, China Merchants Bank, etc. In addition, Douyin has also cooperated with Zhongan Insurance to launch a number of insurance products.

In Douyin's Internet finance business, the farthest is currently small loans.

Byte's previously launched "Rest assured borrowing" benchmarked Alipay's "borrowing", which was once trapped in qualifications and forced to be taken off the shelves, but as Byte replenished its license resources, this business was reloaded and has been running so far. The "Rest Assured Flower" and "DOU Installment" (later renamed Douyin Monthly Payment), which are benchmarked against "Huabei", were launched a little later, but now they have penetrated into all aspects of payment on Douyin.

In January this year, it was reported that by the end of 2023, the balance of Douyin's lending was close to 400 billion yuan. Douyin subsequently denied the rumors.

However, almost at the same time, Douyin increased the registered capital of its Zhongrong Small Loan from 9 billion yuan to 19 billion yuan. Yicai quoted industry insiders as saying that the Zhongrong small loan after the capital increase can theoretically leverage the scale of joint loans of more than 300 billion yuan. This reflects the rapid growth of Douyin's small loans.

However, the problem of Douyin in finance is that it guides users from the content scene to the financial scene, which is a slight "detour" and has a high churn rate. In this case, expanding Douyin payment, converting content traffic into transaction traffic, and then extending to financial business is a breakthrough way to improve the conversion rate.

Payment is recognized as the largest entrance to Internet financial business. After Alipay gained a firm foothold, it soon extended its tentacles to funds, small loans and other fields, and grew the big tree of Ant Group. Douyin, which has added offline acquiring capabilities, also has the opportunity to play a similar role.

On the other hand, Internet finance, which has undergone a major rectification, is a market with strong supervision and high compliance thresholds. However, far more lucrative than other industries, the scale that has not yet peaked, still makes the giants devote themselves to it.

Taking Tencent as an example, the gross profit margin of its fintech and enterprise services business will be as high as 40% in 2023, an increase of 7 percentage points from the previous year. In addition, the full-year revenue of this business increased by 15% year-on-year, while the company's overall revenue growth rate was 10%, and the value-added business, which is mainly based on games, was only 4%.

The outstanding performance of the financial business has prompted Tencent to increase investment. Since 2020, Tencent has repeatedly expanded the registered capital of Tenpay Micro Loan, from 300 million yuan to 10.5 billion yuan at the beginning of this year.

In contrast, Ant has just come out of the rectification period and has not made many recent moves. However, the "wealth management" section still occupies the eye-catching entrance of the Alipay APP, providing a variety of financial services such as Yu'e Bao, funds, stocks, gold, insurance, and pensions.

Tencent and Ant have already made heavy bets in the field of internet finance and are still increasing their weight, while Douyin Pay, as a latecomer, has already been at the forefront of the industry. After making up for the shortcomings of offline, Douyin Pay is expected to gain more users and challenge WeChat Pay and Alipay in more financial scenarios.

C

Douyin Pay, which is usually not loud, is one of the few "offensive businesses" in Byte.

At the end of 2021, Byte was divided into six major business segments, but now only Douyin, TikTok and Volcano Engine are developing well, and the once highly anticipated Chaoxi Lightyear, Feishu and Dali Education have either laid off employees or significantly shrunk their fronts. Feishu laid off employees at the end of last month, and rumors that it will affect 20% of its employees, reflecting that Byte is still in a posture of contraction.

However, bytes are not completely shrinking, but "gaining and entering".

Among the businesses that Byte is still investing heavily in, the AI model is the most interesting. Although it has not been in the game for a long time, the battle around the AI model has spread widely. In addition to the large language model "Skylark", Byte has also launched a series of AI products at the application layer, such as the chatbot "Doubao", the AI social APP "Talker", and the AI development platform "Button", etc., all of which are involved in major tracks.

In contrast, Douyin Pay is not obvious, but the number of users has reached 100 million, and the volume of derivative business is also considerable.

The 1.4 billion yuan acquisition of the offline acquiring license is one of the few large-scale acquisitions by Byte in recent years. Previously, the landing scenario of Douyin Pay was limited to the station, but after intervening in offline transactions, its visibility and user volume are expected to increase significantly.

For Bytes, the immediate value of Douyin payments is to bring in a steady cash flow and provide ammunition for other businesses.

At present, many of Byte's businesses are still in the stage of large investment, such as Douyin shelf e-commerce, life services, etc., and AI is a gold-eating beast that is difficult to balance in the short term. Whether it is an AI application such as a "lark" model or a "bean bag", there is a long way to go from establishing a business model and being self-financing, and it requires continuous blood transfusion of bytes.

Byte's revenue sources mainly include advertising, e-commerce transaction commissions, etc., which are already very large, and the growth rate is slowing down year by year; if Douyin Pay can make a breakthrough, Byte can find a new revenue growth spring, and partially alleviate the pressure of burning money for new businesses.

On the other hand, mobile payments are a good business that belongs to giants – the business model is mature, the revenue model and profit expectations are clearly visible, and only the license is one of the few obstacles. After Douyin Pay won the offline acquiring qualification, the business territory has been further improved, and it is expected to bring billions or even tens of billions of revenue to Byte every year.

However, Douyin payment has entered the offline market, which may become the fuse of a new war between bytes, Tencent and Ant.

Since the second half of last year, the relationship between the three companies has tended to ease, and "competition and cooperation" has become the keynote.

Despite Douyin's push for its own payment, Ant's core product, Alipay, has remained in the Douyin ecosystem as one of the payment options, and users can be redirected to the Alipay payment interface after scanning the Alipay payment code using the Douyin app.

Tencent and Douyin are even more exchanged: after the end of the day, Tencent took over some projects and personnel, and officially allowed Douyin to broadcast "Honor of Kings"; Douyin also reciprocated by acquiescing to Tencent's game advertisements on its own platform.

But in the competitive environment of China's Internet stock, peace between giants is short-lived, and war is eternal. The next focus of competition for the giants will undoubtedly be AI, but beyond that, the "second payment war" is also on the horizon.

Since the launch of WeChat Pay in August 2013, the protagonists of the first decade of the payment war are Tencent and Ant. The two fought fiercely in online and offline scenarios, leaving classic examples such as WeChat's red envelope "Sneak Attack on Pearl Harbor" and Alipay's "Jiwufu". In the end, the two failed to really distinguish the winners and losers, and the "double giants" of the payment market were stable.

But with the entry and development of Douyin payment, a new war is about to ignite. Douyin Pay, which is backed by bytes, has the opportunity to rewrite the mobile payment pattern after completing the license. Douyin Pay's entry into offline will not only help Douyin Life Service and the entire byte, but also may become the beginning of another giant war.

Resources:

Lunch Finance, "Douyin Payment: The Suture of Bytes"

Global Tiger Finance, "Zhang Yiming Wins a Payment License"

Digital Science Society, "Bytes Carry the Banner of Internet Finance?"

Yicai, ""The End of Traffic is Lending"? Douyin's Zhongrong Small Loan has recently been busy increasing its capital

Light Cone Intelligence, "Unwilling to Only Be an AI Application Factory, a Large Model of ByteDance Make-up Classes"