WeChat’s international expansion faces strong competition from Alipay, as both companies’ strategies are focused around making their payment service seamless for Chinese consumers at home and abroad. However, WeChat can succeed if it adapts its approach and features to local markets while striking partnerships with both domestic and international players.
Six years after the successful rollout of its instant messaging app in China, Tencent-owned WeChat is aiming to develop its payments service in the US and Europe in order to target Chinese expats and tourists living in or visiting these markets. Chinese consumers use WeChat to chat with friends, but also to call, send photos and documents, purchase goods in physical shops via QR codes, read and share news, play games, search and buy items online, call taxis, order food and settle bills at restaurants, and send money to other users.
Alongside its presence in Italy through an office in Milan, WeChat is considering opening offices in the UK, with France and Germany to follow in the future. Tencent’s strategy in Europe focuses on striking partnerships to integrate both international and local brands on the platform. This allows it to advertise and increase brand awareness among Chinese consumers as well as Chinese travelers abroad.
The primary focus is on signing international players, with Burberry and Chanel already involved. However, SMEs are also part of WeChat’s European strategy; by partnering with WeChat, these smaller businesses are able to sell to the Chinese market without requiring third-party involvement or a Chinese business license.
An initial attempt on Europe took place in 2013, when WeChat launched a high-profile campaign outside of China and tried to convince European consumers to use its service. Buts its effort were largely a failure, with consumer retention low across the medium and long term.
WeChat faces strong competition in the global environment from Alibaba – its payments affiliate Ant Financial has started promoting Alipay in Europe. Alipay’s international strategy is focused on striking banking and retail partnerships to enable Chinese travelers to pay for goods at around 1 million merchants across Europe through Alipay. WeChat’s answer to Alipay’s success is to integrate its payment service with Chinese consumers’ daily lives, ensuring a seamless experience at home and abroad.
WeChat’s expansion plans outside China are ambitious, yet the group is well placed to succeed, as long as it understands and provides effective solutions to the different challenges it will face in international markets. Of utmost importance is customizing its strategy and features to each local market and convincing a notable number of international and local brands to join its platform.
By Nicolae Bacila, Consumer Payments Analyst