AliPay’s Days of Payments Dominance May Be Ending

The Chinese government may be on the verge of breaking up AliPay and making way for increased competition in China’s massive mobile payments market.  Huawei, the telcom company, appears to think this is a possibility and recently purchased a firm, Xunlian Zhipay which has a payments license and would allow them to offer an alternative to AliPay and WeChat Pay.  

Any company that thinks that it can compete with AliPay and WeChat Pay would have to have some “secret sauce” to compete with these entrenched mobile apps.  Huawei has 300 million existing customers which is a pretty great start.  LedgerInsights had this to say on the matter:

To date, Huawei has apparently intentionally not sought to acquire a payments license. So what’s changed? Firstly, the eCNY or digital yuan is getting closer to launch. And secondly, if AliPay is broken up, this will create new opportunities.

Last year, AliPay parent Ant Group pulled its giant IPO at the last minute. Prior to the IPO, there were already signs of bubbling Government concern about its market dominance.

More recently, Ant was told to turn the parent into a financial holding company, with all the capital requirements that comes with.

On top of that, three weeks ago, the People’s Bank of China published draft legislation for non-bank payments institutions for commentary.   It stipulates that there’s a dominant position if one payments institution has more than half of the market, two have more than two thirds, and three have more than three quarters. Currently, AliPay’s market share is 55% and together with WeChat Pay, they have something like a 90% market share. But the proposed rule states it would still consult the antitrust regulator to confirm the dominant position.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

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