China’s Tencent plans to expand its WeChat messaging platform’s payment services in Europe and open two offices in the UK and another European country. WeChat’s expansion aims to attract more international merchants to join the platform and offer them a channel to interact with Chinese customers and tourists.
WeChat’s total monthly active user base (MAU) reached 889 million in Q4 2016, and the number of monthly mobile payments users increased to 600 million. The strong customer base and high mobile payments MAU lay the groundwork for WeChat’s expansion outside China.
Expansion, but focus remains on Chinese users
WeChat’s expansion to Europe focuses on connecting international merchants with Chinese users. It will leverage its existing 889 million user base to attract more merchants in Europe to join the platform, which will in turn to benefit its user acquisition in China and competition with other payment services such as Alibaba affiliate Alipay. This expansion started in Italy in November 2016, and since then, WeChat has brought about 60 international merchants to its platform.
WeChat’s intention to expand is in response to the increasing number of Chinese tourists travelling abroad. According to industry regulator the China Tourism Academy, there were 122 million outbound Chinese tourists in 2016; the average spending per capita reached $900. Outbound Chinese tourists present lucrative business opportunities for international merchants. With WeChat reaching 600 million mobile payments users, and as the top social app in China, WeChat use among these travellers will be significant. International merchants will therefore look to adopt WeChat as a payments option to win Chinese customers.
In addition to accepting WeChat as a payments method, leveraging WeChat’s messaging and social platform can add more value to the partnerships between merchants and WeChat. Thanks to the absence of leading western players such as Facebook in China, WeChat is the most attractive social platform for international merchants to reach Chinese customers. WeChat offers official accounts for companies to promote themselves through sending customised posts, integrating store location services and providing detailed product information.
WeChat users in mainland China currently use the app to make international purchases via third-party businesses or “micro-businesses” that are set up to facilitate international transactions. This is particularly true for customers of luxury brands and international goods not yet available in China. Partnering with WeChat in Europe could also help international brands establish a more official presence to reach domestic Chinese customers.
Compete with Alipay from China to Europe
Competition with Alibaba is another reason why WeChat is expanding to Europe. Alibaba adopted a similar expansion strategy in April 2016, to enable merchants in Europe to accept Alipay as a payments method to attract Chinese tourists. To secure its dominant position in China, WeChat has to expand the service availability to tie existing users and further acquire new users. WeChat has advantages to compete with Alibaba’s Alipay in Europe: as payments providers, Alibaba has 450 million mobile MAUs which is less than WeChat’s 600 million mobile payments MAUs. WeChat is a leader in terms of its social platform, but Alibaba’s Alipay is a more established commerce focused platform. Alipay and Alibaba have launched a few social networking features within and outside the payments platform but they are still at a nascent age.