Chinese regulators have called upon Tencent Holdings to diminish the mobile payment market dominance of WeChat shortly after Beijing initiated the digital yuan pilot in Hong Kong.
According to reports from Nikkei, Tencent Holdings is facing regulatory pressure from Chinese authorities urging the tech giant to scale back the market share of its WeChat app in the mobile payment sector. This request, as outlined by three sources familiar with the situation, is specifically focused on reducing the share related to in-person payments facilitated through QR codes, rather than transactions related to online shopping.
While the specific targets for reducing WeChat Pay’s market share have not been specified, an insider close to the company shared with Nikkei that WeChat is not actively pursuing user expansion and is exercising caution regarding the potential risks associated with excessive market dominance.
In China’s mobile payment landscape, WeChat Pay and Ant Group’s Alipay reign supreme, overshadowing around 185 non-bank payment entities. The recent regulatory push to rein in WeChat Pay’s market share comes amid Beijing’s push to encourage the adoption of its state-backed digital currency, the digital yuan or e-CNY.
Despite its pilot rollout in 2020, the digital yuan has faced challenges in gaining widespread acceptance. Some officials have reservations about keeping their funds in e-CNY due to concerns about its lack of interest-bearing features and limited utility.
“I prefer not to keep the money in the e-CNY app, because there’s no interest if I leave it there.”
Sammy Lin, an account manager at a state-owned bank in Suzhou
China’s recent regulatory action also coincides with the launch of its digital yuan pilot in Hong Kong, which began less than two weeks prior. In this pilot, Hong Kong residents can load up to 10,000 CNY (approximately $1,385) into their digital wallets through 17 local banks, although they are restricted from engaging in peer-to-peer transactions.
According to data from consultancy firm Analysys, China’s mobile payment sector is incredibly lucrative, with total transactions through third-party service providers surpassing 92 trillion yuan ($12 trillion) in Q1 alone. Among these transactions, QR code payments accounted for 15.59 trillion yuan, highlighting the significant role of digital payments in the country’s financial ecosystem.
Tencent’s recent pressure from Chinese regulators seems to align with broader objectives to prevent private tech giants from overshadowing the state-backed digital currency. By reducing WeChat Pay’s dominance in the market, Beijing may be aiming to provide greater opportunities for the digital yuan to expand and seamlessly integrate into the everyday financial activities of its populace.
