Walmart will replace the Alipay digital mobile payments system it previously has accepted in its stores in Western China with WeChat Pay, Alipay’s main competition in China, Reuters reports.
The move intensifies competition between the top two digital payment systems in China, and the companies that own them. WeChat Pay is operated by Chinese social media and internet conglomerate Tencent Holdings, while Chinese e-commerce giant Alibaba recently acquired a 33% equity stake in Alipay operator Ant Financial.
China is the largest mobile payments market in the world, with about $9 trillion in such payments last year, and Alipay held around 54% market share, while WeChat Pay was up to 40% market share, according to a recent report from The Wall Street Journal.
This looks like a pretty big blow to Alipay, which has been giving up mobile payments market share in China to WeChat, even though the former has been in use for several years and the latter only since 2016.
But, perhaps it shouldn’t come as much of a surprise that Walmart went with WeChat, as the U.S.-based retail giant already has pretty close ties with WeChat owner Tencent in China. Both Walmart and Tencent are investors in JD.com, the company that also happens to be Alibaba’s biggest e-commerce rival in China. Walmart also recently has started to share data and intertwine its loyalty program for Chinese customers with that of JD.com, and JD.com also has been more closely aligning with WeChat on data sharing and other efforts.
Walmart may be acting strategically on its own, adopting WeChat Pay in a region where it feels it makes the most sense, while keeping its future payment options throughout China open. Potentially more intriguing, it could be aligning even more deeply with a group of Chinese partners—Tencent, WeChat and JD.com — that all have begun to understand that the best way to challenge Alibaba is with a team effort.
For now, these relationships and their effects are unfolding only in China, which offers plenty to keep all parties happy. The size and significance of China’s payments market far outweighs that of any other market around the world.
However, it’s also true that overseas endeavors are becoming increasingly important to Alipay and WeChat Pay. Both platforms have made a concerted effort to expand into North America, for example. Those initial moves target Chinese tourists traveling abroad, but could also very well be the beginning of the next phase of competition between two payments giants.
Right now, it’s difficult to look down the road and see how either platform might flourish in the U.S., as the region remains an embryonic market for mobile payments, and a crowded one. Walmart, for its part, has its own branded (and very popular) mobile payment system here, though it may not be out of the question to see Walmart accept one or both major Chinese payment platforms here at some point in the future if demand builds.
China, meanwhile, has established the model for a cashless society that every other country and payments platform right now can only aspire to, and the competition between the top two platforms in the region is heating up.