Tencent Pressured to Reduce WeChat Pay’s Market Share
China’s regulators have reportedly asked Tencent Holdings to lower the mobile payment market share of its popular app, WeChat. This move comes just weeks after the digital yuan pilot began in Hong Kong.
WeChat Pay Targeted for Market Share Reduction
According to Nikkei, the request from Beijing primarily focuses on reducing the market share for in-person payments made via QR codes, rather than online shopping. While specific targets have not been disclosed, a source close to Tencent indicated that the company is wary of expanding its user base too rapidly due to regulatory concerns.
Dominance of WeChat Pay and Alipay
China’s mobile payment landscape is largely dominated by WeChat Pay and Ant Group’s Alipay, despite the existence of approximately 185 non-bank payment institutions. The regulatory push appears to be aligned with Beijing’s broader strategy to promote its state-backed digital currency, the digital yuan, also known as e-CNY.
Struggles of the Digital Yuan
Launched in 2020, the digital yuan has faced challenges in gaining widespread adoption. Some officials have expressed reluctance to keep funds in the e-CNY app due to its lack of interest-earning potential and limited usability.
“I prefer not to keep the money in the e-CNY app, because there’s no interest if I leave it there,” said Sammy Lin, an account manager at a state-owned bank in Suzhou.
Expansion of the Digital Yuan Pilot
The recent regulatory move comes shortly after China initiated its first digital yuan pilot outside the mainland, with Hong Kong residents now able to top up digital wallets with up to 10,000 CNY (approximately $1,385) through 17 retail banks. However, peer-to-peer transactions remain restricted.
Financial Impact and Future Outlook
China’s mobile payment market is highly lucrative, with total mobile transactions through third-party service providers exceeding 92 trillion yuan ($12 trillion) in Q1, including 15.59 trillion yuan from QR code transactions, according to consultancy firm Analysys.
The government’s directive to Tencent appears to be part of a broader effort to ensure that private tech giants do not overshadow the state-backed digital currency. By limiting WeChat Pay’s market share, Beijing aims to create more space for the digital yuan to integrate into the everyday financial activities of its citizens.
