On July 1, WeChat Pay officially charged fees for transfers and payments, a move that attracted widespread attention. Although the amount of fees is not large, it is somewhat abrupt for users who have been accustomed to free services for a long time.
Behind the charges, the cost pressure faced by WeChat Pay and changes in the regulatory environment may prompt it to adjust its business strategy. What new opportunities will this battle of "WeChat Pay vs. Alipay" bring to the mobile payment market?
Cost pressure is an economic factor in WeChat Pay's charges
As the number of users grows, WeChat Pay needs to build a large-scale infrastructure and continuously optimize its fraud prevention and risk control systems. All of this can cost a lot of money. Coupled with the demand for cash withdrawals from users scattered across the country. In 2020 alone, WeChat Pay invested more than 15 billion yuan in cash red envelopes, password red envelopes and other measures to support brick-and-mortar merchants.
Compared with the rising operating costs, WeChat Pay's revenue growth is sluggish. In 2020, revenue increased by 26% year-on-year, but the growth rate has slowed significantly. Fee income can help alleviate cost pressures and drive WeChat Pay to be profitable.
The gradual tightening of regulatory policies is also an important factor in the charging of WeChat Pay. As early as 2017, the People's Bank of China (PBOC) issued the Measures for the Administration of Payment Services for Non-Financial Institutions, clarifying that payment institutions can charge customers necessary and reasonable fees based on cost pricing. A number of regulatory regulations issued subsequently are promoting payment institutions to reduce chaos, standardize their operations, and achieve steady development. Charging a processing fee helps WeChat Pay comply with regulatory requirements.
Compared with Alipay, WeChat Pay is in a catch-up position
Alipay is a pioneer in mobile payment. As of the end of 2021, Alipay has more than 1 billion users, and its market share has remained at about 55% for a long time, ranking first in the industry. With the support of e-commerce scenarios, Alipay's payment transaction scale is also far ahead.
WeChat Pay, on the other hand, started late, and has risen rapidly in recent years with social scenes, with more than 500 million users. However, due to the lack of e-commerce platform support, the transaction scale still lags behind Alipay. WeChat Pay's market share is about 38%, which is slightly inferior. Fee income can provide financial strength for WeChat Pay and accelerate the pace of expansion.
In this round of charging battles, Alipay is passive. In 2020, its revenue growth rate was only 15% year-on-year, entering a period of adjustment. If you rely on the e-commerce scenario alone, it may be difficult to achieve further growth. To cope with the catch-up of WeChat Pay, Alipay is also facing pressure to adjust its revenue structure and increase the proportion of fees.
WeChat may strengthen the social scene and enrich the application
In the face of the impact of fees, WeChat may strengthen the application of social scenarios and give full play to the ecological closed-loop effect, so as to retain users. For example, through innovative social e-commerce models such as mini programs, it provides a shopping experience that is more in line with the needs of young users. Further improve functions such as chat, social networking, and information flow to improve user stickiness.
In addition, WeChat Pay is likely to open up more innovative applications. For example, it has entered the field of digital yuan, and cooperated with banks to develop digital wallets to build a WeChat-based digital yuan circulation scenario. Expand to public services such as education and medical care, so that users can enjoy all kinds of convenient services within WeChat.
Alipay may strengthen the construction of retail circles
Alipay will not sit still, and the retail circle can bring the integration of online traffic and offline consumption scenarios to further enhance user activity. In the future, Alipay may continue to build and expand business districts such as "Alipay Market" and "Alipay Town" to provide operation and service tools for offline merchants and integrate online and offline resources.
At the same time, Alipay will also leverage Ant Financial's comprehensive advantages to provide financial services such as credit history and insurance. Using massive small and micro merchants and personal credit data, we use technology to empower all walks of life, and strive to achieve a win-win situation for merchants and consumers.
The mobile payment market is expected to usher in new opportunities
This toll war also brings new opportunities to the mobile payment market. Payment institutions will no longer rely on payment value-added services to make profits, but will achieve a healthier profit model through innovative applications and scenario operations. The needs of users and merchants will also be more satisfied, and the public service function of mobile payment will continue to improve.
At the same time, this helps payment institutions to have a clear division of labor and complement each other's advantages. WeChat Pay can focus on social scenarios, while Alipay gives full play to its advantages in e-commerce and business circles to form positive competition. The regulatory authorities will also strictly supervise the market regulation of payment institutions to protect the rights and interests of consumers.
The "duopoly" structure of the mobile payment market, dominated by WeChat Pay and Alipay, may also change. More innovative payment institutions are likely to seize the opportunity to grow through breakthroughs in niche segments. Ultimately, China's mobile payment market will develop in a balanced manner.
The country is easy to change, but the nature is difficult to change. The collection of handling fees is only a painful period for the development of the mobile payment market. Historically, markets have often moved forward in contradictions. It is believed that through technology and business model innovation, mobile payment will bring a more convenient life experience to the majority of users and merchants.
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