The online retailer is battling with Tencent at a time when the state has forced both of them to shut down their storage and sharing services
Chinese social networking and online gaming service provider Tencent has pulled out of a high-stakes war with Alibaba Group Holding Limited to control the mobile payments market of China, after paying billions of renminbi on subsidies to attract users. In April 2016, the organization started charging users to transfer money between conventional bank accounts and WeChat Pay, which is a payment facility linked to the Shenzhen based organization’s famous instant messaging application.
Earlier, the social media company subsidized the money transfers through the absorption of the related bank transaction charges instead of transferring them to users. A WeChat wallet feature also permitted transfers between various commercial banks. In January only, Tencent paid $46 million (Rmb300 million) on bank transaction charges, the gaming service provider disclosed in its yearly report.
For the last quarter, “other” revenue expenses grew by 153% to $0.23 billion, a rise it stated was “mainly driven” by bank transaction charges accrued by wallet feature. Chairman of Tencent Pony Ma stated that in March when the organization started to impose user charges, operating losses made by WeChat Pay were “brought under control”. The shift tells us about that a partial de-escalation of Tencent’s market share war with Alipay, the payment facility provided by the financial affiliate of Alibaba Ant Financial.
Rivalry between the organizations intensified when the lunar year started in the last year, when both invested billions of “red envelope” cash discounts to attract new users. An initial duel between the internet companies over vehicle-hailing applications started with a battle of subsidies for drivers and riders but ended when the Alibaba backed Kuaidi and Tencent’s Didi.
The launch of user charge is purely not a cost-saving move. Analysts state imposing withdrawal charges will make funds stored in the wallet “stickier”. The subsidies of Tencent helped WeChat lure many years and added to the transaction volume in 12 months that saw that online-to-offline mobile payments exploded to merchants like restaurants and supermarkets.
By market share, Tencent cannot show money it paid. Caifutong, which is its payment partner, process one-fifth of Chinese third party E-payments in 2015, compared with 48% of Alipay, revealed iResearch. That is up just by half a percent point from 2014.
According to South China Morning Post, the Huangzhou based company is struggling as it has recently said it will suspend its storage services entirely. Similarly, Weiyun and Dongguan-based “115” have stated in the previous month respectively that both of them will switch off a number of their sharing functions. The state run campaign against illegal publications and pornography has led to the shutdown of the facilities.
Guangdong 115 Technology’s CEO and founder Lai Linfeng has stated “It is impossible for us to see the uploaded content and it costs enormous resources to censor them when those files are shared, ”The state didn’t demand 115 to close down its functions but ordered it to rule out unlawful content and be self-disciplined, revealed Lai.