WeChat, China’s smash hit messaging app, has long been a bellwether for the future of mobile messaging. It was first to popularize putting brands in chat and integrating third-party services, two trends Facebook-owned WhatsApp and Messenger and others are jumping on, and it looks like payment is the next major focus.
Tencent, the company behind WeChat (known as Weixin in China), just announced impressive end of year financials (PDF) that included its highest quarterly revenue growth for three years. Among the other items disclosed, WeChat is now up to 697 million active users worldwide each month having added close to 200 million to that figure over the past year.
Beyond text messaging, voice and video calling, the service includes a social network timeline, branded accounts, shopping, games and more. Payment is another area and over the past year, Tencent has put considerable focus into its China-based service, WeChatPay, which can be used to transfer money between WeChat users (peer-to-peer) and make payment online and with participating offline retailers. Tech In Asia tested it out for a day in China and came away reasonably impressed, although it seems there’s room for improvement.
We know from previous disclosures that over 200 million WeChat users use the payment service, thanks to a genius campaign that taps into China’s tradition of sending red envelopes during New Year, and now we have our first major hint at just how big it might be.
Tencent said today that it banked over RMB300 million ($46 million) from bank handling fees from WeChatPay, almost all of which came from China. (The service did recently go live in South Africa via its first international expansion, while Tencent is offering it globally to merchants that want to attract custom from Chinese tourists.)
It isn’t clear exactly what size fee Tencent charges for WeChatPay, but if it is just one percent, for example, then close to $5 billion is circulating on the service at any given month among that userbase of over 200 million.
That’s hugely impressive, and it shows that the service is a growing threat to Alibaba’s Alipay service. While Alipay is established as China’s top payment option with 500 million users and 200 million credit cards, the sheer convenience and mainstream adoption of WeChat play massively in its favor.
Tencent is also stoking the fire by dropping fees for peer-to-peer transactions, a move aimed at making WeChat the standard for moving money between friends. Another new policy charges users a fee when they transfer a certain from their WeChatPay wallet to their bank account, thus incentivizing them to retain funds in their account, which will presumably then be spent on or distributed to others via the service.
WeChat pulls in more money from games and advertising, but payment has the potential to become a very key area for both revenue and user engagement. In a sign of the growing importance of its WeChat business, Tencent CEO Pony Ma told reporters that the firm has no plans to spin out the chat app as a standalone entity.
Focusing back on the U.S. and Facebook again, the social network’s messaging strategy appears to be a few steps behind where WeChat is at right now but, potentially, it is on a similar path.
Last year, Facebook turned Messenger into a platform that will accommodate brands over time, while WhatsApp will also soon allow users to connect with companies too. Facebook offers peer-to-peer payments in the U.S. only for now, but it makes sense that it will push the payment angle much harder once users of both messaging apps become accustomed to liaising with companies there.
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