Everything You Need to Know about Alipay and WeChat Pay

Recently I have been getting a lot of questions from my American and European friends and colleagues about what Alipay and WeChat Pay do and what impact they have made on the payment industry, as increasingly more businesses start to realize their importance thanks to their media traction lately. So I decided to write a piece about Alipay and WeChat Pay about their history, how they shaped the ecommerce and payment industries in China, and their growing impact outside of China.(Disclaimer: all views are my own, not related to my employer.)

I. Where Alipay and WeChat Pay came from


Born in 2004, Alipay was first created as the payment department of Taobao, the B2C platform of Alibaba Group. It was right after eBay acquired Eachnet.com in China, and Taobao saw this acquisition as a major threat for its marketplace business. To enhance its competitive advantage, Taobao tried to solve the biggest pain point in ecommerce in China at that point — the trust between seller and buyer. Back then, many conversations between sellers and buyers on Taobao failed to result in a transaction, often times because both sides suspected each other as fraudsters. So Taobao introduced Alipay as a 3rd party to temporarily hold the money paid by the buyer, and would not release the money to the seller until the buyer confirms that the product was received and in good condition. Successfully solving the trust issue, Alipay saw tremendous growth on Taobao plaform, and even started to be used on other platforms outside of the Alibaba ecosystem.

Along the way, Alipay put a lot of emphasis on improving payment authorization rate in order to guarantee the best user experience. For its convenience and reliability, Alipay has also caught on the rising momentum of mobile commerce and became the dominant payment method. As a result, so much cash was sitting in Alipay’s deposit pool that it figured out a way to benefit the shoppers and to further enhance user stickiness, by providing Yu’EBao service, a money market fund for shoppers’ deposits in their Alipay accounts. With interest rate higher than bank accounts deposit rate, more and more shoppers were attracted to use the Yu’EBao service as a virtual wallet. It turned out to be a milestone for Alipay, as it was the first step to expand beyond payment service and to become a full-fledged financial services company: Ant Financial.

According to press report, Alipay currently has more than 600 million registered users, of which about 300 million are MAU and 80 million are DAU.

WeChat and WeChat Pay

WeChat Pay is the payment function of WeChat, which is widely seen as the WhatsApp of China. In fact, WeChat and WhatsApp, together with LINE and Kakao in Japan and Korea, were all inspired by Kik Messenger. WeChat was developed by Tencent, which is the creator of QQ, one of the major IM messengers in China and the main competitor of Microsoft’s MSN messenger in the desktop era. Tencent saw Kik Messenger as the new form of IM messenger, because QQ and MSN were not built for the mobile era, and thus created WeChat in 2010.

After years of improvement and growth, WeChat is no longer just a messenger like WhatsApp. It has rather built a huge social platform, including photo and moments sharing among friends and public accounts owned by independent publishers and brands. Before WeChat, the social media space in China was heavily influenced by Facebook, which induced a local copycat Renren. In 2012 when WeChat launched version 4.0 as the first social network built for smartphones, it gradually attracted all the Renren users and started dominating social media in China. Sina Weibo, the Chinese counterpart of Twitter, suffered as well, and today Renren doesn’t exist any more.

It wasn’t until 2013 did WeChat launch version 5.0 to enable payment service, dubbed WeChat Pay, about 10 years after Alipay was born. Because of WeChat’s social network DNA, WeChat Pay was first created just to enable P2P transfers and in-app purchases on public accounts. However, as mobile commerce took off and reshaped lifestyles, WeChat Pay quickly expanded its features and started competing with Alipay in many areas.

Media reported that WeChat Pay has a bit less users than Alipay at 400 million, but WeChat has more than 800 million users, so there is significant potential.

II. What they are doing in China now

In order to fully appreciate their capabilities, it’s important to understand the background. Alipay is part of Ant Financial, which is closely connected to Alibaba, and WeChat is part of Tencent. Therefore, the battle between Alipay and WeChat Pay is often regarded as a proxy war between Alibaba and Tencent, the two internet giants in China. In recent years, Alibaba and Tencent have been very active in strategic investments in successful early- to mid-stage startups operating in sectors with potential synergies.

Financial services: As mentioned, Ant Financial has grown into a full-scale financial service company built on big data infrastructure, so Alipay is integrated with a wide spectrum of financial services, such as money market investment (YuEBao), insurance service (ZhongAn), credit rating (Sesame Credit), personal credit line (Ant Micro Loan), as well as SMB banking (MYbank). However, WeChat Pay is not as strong in other aspects of financial services, besides offering money market investment accounts similar to YuEBao.

In-App purchase: The in-app purchase function enabled WeChat to build a huge ecosystem of public accounts of brands and independent publishers. Brands can easily push notifications for sales and discounts to encourage in-app transactions. Independent publishers can accept micro-payments for “likes” on their articles, something Bitcoin was trying to achieve in the rest of the world. In fact many independent publishers have accumulated such humongous amounts of viewers — many articles with as many as 100,000+ viewers — that some of the editors have evolved to be content entrepreneurs valued at millions of dollars. Alipay, on the other hand, lacks similar social payment features.

Mobile-CRM: Public accounts have been so widely adopted by global luxury retail and hotel brands that WeChat has become the best Mobile-CRM tool — recent survey showed that 92% of these global brands actively manage their WeChat public accounts. Unlike traditional CRM tools, WeChat enables brands to do better-targeted campaigns based on consumer persona using WeChat data, as well as 1-on-1 customer interactions via the messaging and chatbot channels.

Ecommerce: This was Alipay’s advantage from the get-go because of its history with Taobao. Now Tmall, Tmall Supermarket and Taobao’s food delivery service are also integrated to Alipay. While on WeChat Pay, although Tencent was not established as an ecommerce store, Meilishuo and JD.com are connected on WeChat Pay thanks strategic investment and partnership. Besides, WeChat Pay brought in Meituan as a partner for food delivery service, as well as 58.com, the craigslist of China, for handyman services.

In-store shopping: Almost all shopping malls in China accept Alipay or WeChat Pay by scanning QR code on POS, whether it’s a fully automated vending machines or traditional checkout counters with an attendant. The lowest-cost version for the vendor can even be just a piece of paper printed with the QR code, which the shopper can pay by simply scanning that code. This capital-light and frictionless way of accepting payments was exactly why China has already become a largely cashless society.

Leisure: Dining out is integrated on Alipay via Koubei, one of Alibaba’s investments, while WeChat Pay offers similar service via Dianping invested by Tencent. Both Alipay and WeChat Pay are accepted in the majority of restaurants and both support bill splitting. After dinner, movie tickets can be purchased on Alipay via Taopiaopiao or on WeChat Pay via Yupiaor. You may even run into Karaoke booths in shopping malls. Fully automated with WeChat Pay, you can check-in and pay by scanning QR code and even share your recorded songs on WeChat with your friends.

Travel: Alipay has a direct connection with Airbnb and Uber, and both Alipay and WeChat Pay are connected with Didi Chuxing, which acquired UberChina last year. Hotels, flights and train tickets can also be booked in both apps via integrated partners.

Other services: Alipay and WeChat Pay can handle a lot of tasks such as booking doctor appointments, paying for utilities, checking social security information, filing for tax, paying at gas stations, traffic tickets, and mails and packages, just to name a few.

To summarize, benefiting from the large partner base of Alibaba and Tencent, Alipay and WeChat Pay have covered so many aspects of social life that they left very little room for competitors. Meanwhile, they continue to explore new payment scenarios and offer better and more comprehensive services in order to solidify their dominance within China. Moreover, they have already started expansion outside of China.

III. How Alipay and WeChat Pay will impact the rest of the world


Valued at $60 billion, Ant Financial has been using all the money it has raised to make strategic investments as well as establishing strategic partnerships around the world. It started in 2015 with a $680 million investment for 40% shares into Paytm, the mobile payment startup in India. The investment was very effective — by the end of 2016 Paytm claimed to have 177 million users out of the total 220-million smartphone user base in India, a staggering 80% market share. With the Indian ecommerce market estimated to reach $200 billion by 2020 and the number of smartphone projected to go over 800 million by 2021, Ant Financial as well as Alibaba’s ecommerce and logistics platforms are expected to further benefit from Paytm’s dominance in the Indian market. Meanwhile, Alibaba also led a round of $500 million investment into Snapdeal, an ecommerce leader in India. Later in Dec 2015, Ant Financial formed a partnership with Wirecard to process POS payments in Europe, as the first movement to tap into the European market.

May 2016 was a watershed moment, when Ant Financial made headlines on international media, as it hired Douglas Feagin as SVP for International Operations. A graduate of University of Virginia and Harvard Business School, Mr. Feagin worked as the Head of Financial Institutions Group for Americas and Asia at Goldman Sachs. Soon after Mr. Feagin joined Ant Financial, it formed a series of partnerships around the world, including Paysbuy in Thailand for online-to-offline payments, Ingenico, Zapper and Concardis in Europe for mobile POS payments, and Verifone and First Data in the US.

In July 2016, Ant Financial led a massive round of financing into M-Daq in Singapore, which a forex product for ecommerce platforms in the region. In Nov 2016, Ant Financial acquired 20% shares of Thailand’s Ascend Money, to grow its digital and offline payments and financial services in Thailand while opening doors to Indonesia, The Philippines, Vietnam, Myanmar and Cambodia where Ascend Money also operates in. All of these deals were announced before the Nov 11 online shopping festival and the winter tourism seasons. As a result, Alipay transaction volume on Nov 11 grew 48% to about $20 billion, from 235 countries and regions around the world.

More recently in Feb 2017, Ant Financial announced raising $3 billion in debt financing. Almost at the same time, it also disclosed a series of investments including $880 million acquisition of MoneyGram in the US, an undisclosed amount in Mynt, which provides micro-payment service and mobile loan service in the Philippines, and $200 million in Kakao Pay, the mobile payment subsidiary of South Korean messaging platform giant Kakao, or the WeChat of South Korea. Also, Alipay announced a partnership with Citcon in the US.

Ant Financial’s investments and partnerships mostly follow the most attractive destinations for Chinese tourists and businessmen, such as the US, Europe, and Southeast Asia, except for India where it was going after the huge potential for ecommerce boom. For example, the first merchants in the US to sign up for Alipay in-store POS are duty-free stores in major airports like New York and San Francisco, high-end retail shops, hotels in Las Vegas, and Chinese restaurants in major cities. In fact, it is a very sound strategy — just over 1 week during the Chinese New Year holiday 6 million Chinese tourists travelled around the world and spent more than $15 billion.


WeChat’s unique position as the top M-CRM tool for top global brands gives WeChat Pay promising potential to become the primary payment method for Chinese customers travelling and shopping abroad — a strategic advantage over Alipay. However, WeChat Pay is lagging behind in terms of global expansion and partnership, mostly because Tencent is not an ecommerce company and thus doesn’t enjoy the synergies with the ecommerce and logistics platforms. Also, Tencent doesn’t have an equivalent of Ant Financial — an independent financial services arm to design and implement coherent corporate strategies. Therefore, we still haven’t seen significant presence of WeChat Pay POS solutions outside of the greater China area, but shops and merchants should never discount the financial benefit associated with accepting WeChat Pay, based on its vast user base and purchasing power.

In the mean time, we have seen increasingly more ecommerce companies accepting Alipay and WeChat Pay, including many top tier global tech giants, rising sharing economy unicorns, and high-end global retailers. In order to better reach the local market in China — to provide a frictionless shopping experience with Chinese customers and to make it easier for Chinese businesses to advertise to a broader global audience — accepting Alipay and WeChat has become part of the core strategy of global expansion for many companies.

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