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China’s regulators have asked Tencent Holdings to lower the mobile payment market share of WeChat just a few weeks after Beijing started the digital yuan pilot in Hong Kong.
Tencent Holdings is reportedly under pressure from Chinese regulators as Beijing is asking the tech giant to reduce the mobile payment market share of its WeChat app, Nikkei reports, citing three sources familiar with the matter. The request is understood to primarily target the market share for in-person payments made via QR codes rather than online shopping.
Although the precise numerical targets for WeChat Pay’s market share reduction remain unspecified, a person close to the company told Nikkei that “WeChat is not targeting user expansion and is very cautious about the potential risks of growing too big.”
China’s mobile payment ecosystem is currently dominated by WeChat Pay and Ant Group’s Alipay, despite the presence of approximately 185 non-bank payment institutions. While the exact reason behind the latest move remains unclear, regulatory pressure coincides with Beijing’s efforts to promote the adoption of its state-backed digital currency, the digital yuan, also known as e-CNY.
Since its pilot launch in 2020, the digital yuan has struggled to gain significant traction, with some officials preferring not to keep their money in e-CNY due to concerns over the absence of interest and limited usability
“I prefer not to keep the money in the e-CNY app, because there’s no interest if I leave it there.”
Sammy Lin, an account manager at a state-owned bank in Suzhou
The latest move also comes less than two weeks after China started its first pilot outside the mainland, with digital yuan now available in Hong Kong. According to the Hong Kong Monetary Authority, the local residents can top up digital wallets with up to 10,000 CNY (approximately $1,385) via 17 retail banks in Hong Kong, though barred from conducting peer-to-peer transactions.
As Nikkei notes, China’s mobile payment market is highly lucrative. The total mobile transactions through third-party service providers surpassed the 92 trillion yuan ($12 trillion) mark in Q1, including 15.59 trillion yuan from QR code transactions, as per data from consultancy firm Analysys.
The Chinese government’s directive to Tencent appears to be part of broader efforts to ensure that private tech giants don’t overshadow the state-backed digital currency. By curbing WeChat Pay’s market share, Beijing might be traying to create more room for the digital yuan to grow and integrate into the daily financial lives of its citizens.