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Alipay and WeChat Pay: history and strategy

What happened in China makes now the whole world pay very close attention.

First, back in 2004 when Alipay appeared on Taobao as an escrow system, slowly evolved as a seller accreditation, partnered with all major Chinese banks, offered daily payments, and accounted for 200 e-wallets and 10 million app installs — no one raised a brow.

Second, it was the beginning of 10’s that signed for something extraordinary. Extremely popular QQ social messenger and network ventured into somewhat free-will mobile app — now called WeChat, that allowed businesses to reach users directly. And the instrument chosen was long existed before — QR code, that merely led to the brand or business channel within the messenger.

It so happened that this simple connection instrument was apt for payment information collection as well, and worked beautiful, as Alipay offered such opportunity roughly at the same time. Most Chinese SME could not afford expensive POS equipment for bank card processing, and accepted only cash. How fortunate it was that QR-code with the key to their e-wallet could be basically printed out on a paper and shown to customer. Not only that, but all payment from customers and SMEs were treated as p2p, and were of 0% commission. Sounds cool, right?

Was it the magic of QR-code or smart application within the right environment?

From that point forward things accelerated to rocket speed, Alipay was sewing the mosaic of financial and not-so services — investments, loans, crowd-funding, deposits, digital banking, tax-free, tickets to all transport, concerts, marketplace, bonuses, taxis, bikesharing, food delivery, all things delivery — you name it. The whole ecosystem of the things you were used to finding at different apps or places, all gathering into one place at blistering speed.

WeChat was no loser in this race, as it was a lifestyle app first, payments coming second. Whatever was offered to ease the life of ordinary and quickly becoming rich and richer megapolises, appeared on both platforms, and belonged to either of them.

In less than 7 years it made no sense to bring your old school wallet with you, you’d better have a charging powerbank instead.

Number of apps used by average Wang plummeted to less than 5, but frequency and time spent with those kept approaching alarming rates. Was it payments that made this happened, or payment functionality dissolved itself in whatever services or content hungry Wang craved? How come no Chinese person has a physical wallet anymore, and only finds dusty China UnionPay card, when plans to travel outside. How come most cash 7/11 cashier in Shanghai sees during the day, are from the foreigners?

Within the feast of progress, and overall joy, it was easy to miss out on some other important stuff that was going on behind the scenes.

From its inception, Alipay was no less b2b service, as it was a b2c one. Scoring sellers on Taobao, indexing Chinese e-commerce enterprises, developing a credit scoring for their customers, and enriching the scoring data more and more, thriving on data. Calling Alipay an e-wallet involuntarily guides us in stereotypical thinking of the ecosystem goal. What if you start calling Alipay a scoring system, that continues to build on not only payment, but behavioral data, location data, that exists within a lifestyle ecosystem that closely connects businesses with their customers, fuels new spenditure habits and ceremonies like red packets, enables personalized pricing models? I bet this starts change your perception.

But then, is WeChat a messenger with payment function? Or is it a digital key, all-encompassing platform, authorization system, new media, super-ID?

It would be oversimplification to think that both giants have years-long well-thought through strategy that they implement step by step. We can only imagine what future out of multiple ones we will get ourselves into in 5 years.


Comments: (2)

Vishwanath Thanalapatti
Vishwanath Thanalapatti - Temenos - Canada 10 October, 2018, 04:33Be the first to give this comment the thumbs up 0 likes

In my experience stratups generally have a loose knit strategy. There are a few reasons for this. The most important one being uncertainity of success. When something does not work in the market place a quick rethink of strategy becomes essential. Much is built as one trudges along. The key here is how well and quickly one can adapt to the fast changing environment, for reasons beyond ones control a peach of an idea can just evaporate. There I think Alipay and Wechat have scored very well.

A well articulated blog. 

A Finextra member
A Finextra member 16 October, 2018, 12:114 likes 4 likes

Another good blog post from Anna. Well done!

I agree with Vishwanath: the journey of a successful startup is never from A to B. It's always "in the direction of B", like a river flowing towards an ocean. In many cases, company's success happens at Z, not even B.

Anna Kuzmina

Anna Kuzmina



Member since

21 Jan 2019



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