WeChat Pay and Alipay Partner with Stripe To Make Payments Easier
WeChat pay and Alipay are competitors for the Chinese online payment market, but both companies have managed to secure a partnership with the United States based company Stripe. Not only is this great for Chinese consumers, but it is also a fantastic opportunity for companies who want to move into the Chinese market.
What is WeChat Pay/Alipay?
Most online platforms have a form of online payment. Most people are familiar with ApplePay, a system that anyone with an apple product and online banking can access. The same can be said about Paypal.
However, because of the nature of Chinese digital markets, as well as their different social media sites, these payment options have not taken off. Platforms that have taken off, however, are WeChat pay and Alipay.
As the diagram above states, the primary method for online payments in most cities are the online payment platforms such as WeChat pay and Alipay.
As you can also see, payment services you may familiar with are not popular at all in China. This is due to the reliance on specific platforms such as WeChat. In China, trust is everything, therefore consumers have a tendency to only use products that they know are reliable.
WeChat pay is managed by Tencent Holdings Ltd. WeChat is the largest social media platform in China, dominating the online market in most areas.
WeChat pay can be used for a number of different services, in a number of different settings. Clearly, it is an incredibly important platform.
Both WeChat pay and Alipay have around 90% of the market share and are estimated to have processed close to $3 trillion dollars in 2016 alone.
Alipay is managed by Alibaba affiliate firm Ant Financial. They have over 500 million users. The mobile wallet service is already accepted by over 100,000 retailers in 70 different countries.
The partnership with Stripe will aide Ant Financial’s expansion abroad. They have acquired for $1.2 billion the U.S. money-transfer service MoneyGram. Earlier in the year, they struck a deal which allowed Alipay users to shop at 4 million U.S. merchants.
WeChat pay and Alipay are very similar to online payment services you are used to, with one key difference. Unlike services like Paypal, WeChat pay and Alipay are already directly linked to your social media. This means that anytime you see a product or service that you want online on social media, you can automatically buy it, providing that the retailer has an online connection.
Clearly, this is a unique advantage that only WeChat pay has in China. WeChat is the most popular social media platform in China, therefore its additional services have a serious advantage over the competition. Convenience and ease are one of biggest factors that most consumer desire.
Stripe is one of the leading online payment platforms. Most customers don’t even know Stripe exists, and I must admit until I started researching the platform, I wasn’t totally aware of what it did.
Stripe allows businesses to take online payments from around the world. Most businesses won’t have a contract with a specific bank, but rather go through stripe, which takes a 2% commission.
This platform is popular because it works for 25 major countries, including the United Kingdom, the United States, Hong Kong, Japan, Australia and much more.
Stripe was created in 2010, and since its creation, it has been on the forefront of the online transaction world. In 2013 the company acquired the task-management application Kick off. In 2014 they announced that they would be accepting Bitcoin transactions.
As of 2018 Stripe’s valuation was estimated at around $20 billion.
It comes as no surprise then that the company chose to partner with Alipay and WeChat pay. Since these are the two largest online payment in platforms, it seems very straightforward that the two would pair.
The partnership itself-
The partnership between the three companies is an incredibly interesting merger, one that will open up a world of e-commerce to the Chinese consumers.
While Stripe has previously had a deal with Alipay that covered the U.S., this new partnership will cover the whole world.
Alipay integration also supports recurring payment thus allowing for a subscription to different consumer payment plans. Stripe will continue to support this feature making it easier for Chinese consumers.
As of July 2017, the partnership allows for online merchants that are using Stripe to integrate the ability for Chinese users to pay with Alipay or WeChat pay.
The point of this partnership is not to increase Stripe’s presence in China, that would be an irrational target considering how much of the market share that Alipay and WeChat pay.
No, the point of this merger is to increase how many online retailers that Chinese consumers have access to. Since Stripe is the only company that has access to the Alipay and WeChat pay customer database, more and more online retailers will want to join the service, boosting the contracts that Stripe have.
For many countries, this will be an amazing opportunity to access a market they may not have had access to before. Barriers to entry in the Chinese market tend to be incredibly high. Marketing strategies differ massively, and many companies have to invest in advertising and marketing on different social media platforms.
John Collison, Stripe president and co-founder has stated that this will be an incredible opportunity for many internet businesses as it will unlock a vast customer base.
For many companies, this comes at a great time. Since Brexit, many U.K. based companies have been worried about the increased barriers to entry into Europe. Products and shipping are about to increase massively.
This allows companies based in the U.K. to move into a market that may have been inaccessible otherwise. Traditionally, moving into China has been associated with much larger companies who have a large disposable income.
However, with the partnership, this will make it much easier for people to move into the market. Now that system is integrated with the Chinese market, companies will only have to pay for marketing costs, which will not include setting up an online shop.
Chinese consumers are now able to shop on foreign sites without having a foreign bank account. Previously this was not the case due to strict Chinese banking regulations.
The president of Alipay has stated that the primary focus of this merger is being able to serve as many countries as possible. Furthermore, they are looking to create a cashless society as well as benefiting the Chinese consumer.
Stripe has well over 100,000 customers globally who pay a fee to Stripe when a payment is processed, thus the success of this venture depends solely on the Chinese consumer appetite for foreign products.
Chinese Consumers demand foreign products-
In some markets, most Chinese consumers will refuse to buy domestic products due to lack of trust and previous scandals. A good example of this baby food.
In 2008 the Sanlu Scandal erupted in China. It involved a baby formula company who sold tainted products which caused thousands of babies to be hospitalized and there were sadly several fatalities. This was a major scandal and resulted in several criminal prosecutions and a death penalty.
Since this, most Chinese consumers refuse to buy domestic baby products and will instead choose to import foreign products. This means that the market for baby formula and products is going to become more competitive in China since smaller companies are able to move into the market.
This means that the market for baby formula and products is going to become more competitive in China since smaller companies are able to move into the market.
Similarly, the supplements and health and wellness market. Healthcare and wellness are already a hard market to gain trust in, in any country. For Chinese consumers, however, this is especially true.
Most Chinese consumers will only buy products from other countries. This especially true for diet supplements.
What this means for your business-
Now is a great time for smaller and medium-sized businesses to start thinking about moving into China. Lower barriers to entry mean that this is a great time to invest in a Chinese digital marketing agency.
Here at Dragon Social, we pride ourselves on being ahead of the game when it comes to changes in the Chinese market. With a range of clients in various markets, we are experts in how to market your product successfully to Chinese consumers. If you would like to find out more, please visit our homepage, to find out about our company and our services.