Walmart ditches Alipay in western China for Tencent's WeChat

March 27, 2018

Walmart, the US retailer, has ditched Alipay in favour of Tencent’s mobile payments app in western China, dealing a fresh blow to Alibaba in the battle between the country’s biggest tech groups to dominate the $15.5tn payments market.

Payments have become a key battleground for the Chinese groups — both of which rank in the world’s 10 most valuable companies — as they compete in markets spanning retail, entertainment and logistics.

Walmart, which along with Carrefour is among the biggest foreign retailers in China, has been accepting Alipay in its 400-plus stores in the country. However, this month it said it had entered into partnership with WeChat Pay in the western region.

Payments yield only wafer-thin profits but have enabled the tech companies to expand their financial services arms to include more profitable areas spanning loans, insurance and asset management. Yu’e Bao, the money market fund of Ant Financial, the payments affiliate of Alibaba, for example, is the world’s largest with about Rmb1.5tn under management.

Part of the market’s growth is due to China’s poor system of legacy banking — the country has mostly leapfrogged credit cards, for example — but has also been fuelled by innovations such as movinghongbao, the red packets of money given at lunar new year, online.

Shops, taxis and hospitals across China accept both the payment methods of Tencent and Alibaba, with some shops and services refusing to accept cash.

Alibaba remains the industry leader but Tencent has made huge inroads. Tencent, for example, scored an early win with Starbucks’ coffee shops across China but late last year the chain said it would accept Alipay too.

Walmart declined to explain why the company was ditching Alipay, saying: “This business decision is intended to help us offer the best all-round shopping experience for our customers. WeChat Pay is widely accepted and trusted in China.”

Announcing annual results last week Pony Ma, chairman and chief executive of Tencent, said it was not looking at payments to generate short-term profitability. “We want to nurture mobile payment into a very good basis so that our partners and users can utilise [them]” he said.

For shops and restaurants, the advantage of mobile payments is that they can target users with special promotions and discounts: someone booking a meal at a French restaurant could be offered a discount on wine, for example.

Walmart is one of the more successful foreign chains in China’s highly fragmented grocery market but has struggled to gain more than a low single-digit market share.

Ant Financial declined to comment.

Additional reporting by Tom Hancock

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