US payment firms have long had difficulty gaining approval to operate in China, but PayPal and American Express were given the green light to start operating in China and Mastercard became able to prepare to operate in the country within the last eight months.Īdditionally, the countries’ governments signed an agreement in January that required Beijing to accept and review payments’ firms applications to operate in China in a timely manner. US payments players including American Express, Mastercard, and PayPal, which have all made progress toward operating in China. The Chinese government is certain to retaliate against the US ban of WeChat and TikTok, and US payment firms expanding into China might get caught in the crossfire if that happens. This could ultimately force WeChat to shift its focus to other markets like Europe, or to rethink its global growth strategy for its payments business. But a ban on transactions within the US’ jurisdiction would remove its ability to provide those services in the country, limiting the potential of its international efforts: The US was the third-most popular overseas travel destination for Chinese tourists in 2019. In the past, it’s highlighted the US as a core market in this push. If the ban goes into effect - it’s slated to begin in mid-September - it would remove a major country from WeChat Pay’s plans to grow internationally. WeChat Pay has been expanding its cross-border payment business and ability to serve Chinese tourists, positioning it to possibly secure more volume and greater loyalty from users by offering more capabilities as they go abroad. President Trump stated that this move is meant to combat concerns about WeChat’s ability to collect data for the Chinese government, making it similar to the recent decision to ban transactions with ByteDance, which operates TikTok. WeChat Pay is a major player in China’s third-party mobile payment industry, helping Tencent control an estimated 39.5% of transactions in the market in Q3 2019, second to Alipay. Because the executive order calls out WeChat’s electronic payment capabilities it will likely impact WeChat Pay. Users can, for instance, receive a cash-filled electronic red packet from a Douyin campaign and deposit that cash to their bank accounts.The US President, Donald Trump, has issued an executive to ban any transaction involving WeChat, which has over 1.2 billion monthly active users, and potentially other subsidiaries of Tencent, its parent company, within the US’ jurisdiction. The license, in turn, allows Douyin, Toutiao and other ByteDance services to offer payment features. Last September, a company controlled by ByteDance founder Zhang Yiming bought out a payments solution provider called Wuhan Hezhong Yibao Technology Co. Like other internet firms, Douyin parent ByteDance snapped up a coveted payments license by acquiring a third-party payments firm. All in all, Alipay and WeChat Pay handle about 90% of China’s electronic payments. Other internet giants, such as e-commerce giant JD.com and food delivery service Meituan, have also tried luring people to use their own payment methods, though the market duopoly is hard to break. Instead of the ubiquitous WeChat Pay and Alipay, they may opt for Douyin Pay one day, if the incentives are great enough. Users can be directed to a product link while watching a video of an influencer reviewing, say, a lipstick. Payment is a natural step for Douyin, which has a growing e-commerce business. “The set-up of Douyin Pay (Douyin Zhifu) is to supplement the existing major payment options, and to ultimately enhance user experience on Douyin,” a Douyin spokesperson said. The short video app recently added “Douyin Pay” to its list of existing payment options, which have included Alipay and WeChat Pay. The latest entrant in online payments is Douyin, TikTok’s Chinese version. Tencent’s WeChat Pay and Alibaba’s affiliate Alipay have long dominated digital payments in China, but they have always faced new challengers.
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