U.S. Banks Are Terrified of Chinese Payment Apps
China’s leading antitrust authority is considering whether to investigate Alipay and WeChat Pay at the behest of the central bank, which claims the digital payment giants have used their dominant positions to suppress competitors, sources told Reuters..
The Antitrust Committee of the State Council has been collecting information on Alipay, owned by Ant Group, which in turn is an affiliate of Alibaba Group Holding Ltd, and WeChat Pay, owned by Tencent Holdings Ltd for over a month..
Any investigation is likely to dampen enthusiasm for Ant Group’s planned dual listing in Hong Kong and Shanghai, which is estimated to be worth more than $ 200 billion..
Sources said the antitrust committee had not made a decision on whether to continue the investigation and it was unclear when a decision could be made. One source told Reuters that the committee takes the People’s Bank of China recommendation very seriously..
Sources who asked for their privacy also said Ant and Tencent are lobbying government officials to try to prevent an investigation..
The State Council Information Bureau and the central bank did not respond to requests for comment from Reuters. Ant and Tencent did not respond to requests for comment on potential investigation.
The People’s Bank of China has officially recommended that the State Council Committee consider antitrust issues raised by the country’s non-bank payment companies in the second quarter, one source said..
Alipay and WeChat Pay, which allow scanning code payments, have become ubiquitous in daily life in China, and now many people in this country rarely use cash..
According to the internal consulting agency Analysys, about 56.2 trillion yuan ($ 8 trillion) of transactions were made in the country’s mobile banking market in the last three months of 2019. He estimates that Alipay has 55% of the market, while Tencent’s fintech business, most of which is WeChat Pay, has 39%..
But the authorities are seeking to nullify their dominance. To encourage smaller players to enter the market, the central bank said last year that it plans to standardize QR code payments interoperability..
For the first time in more than 11 years, the Chinese legislature is also discussing major changes to its antitrust laws, which should include expanded criteria for assessing a company’s control over the market..
Ant, one of the world’s most valuable non-listed companies, made $ 2.2 billion in profit in the fourth quarter, according to Reuters calculations based on Alibaba regulators. Its main service Alipay has over 900 million users in China.
WeChat Pay had over 800 million monthly active users in the fourth quarter, according to a 2019 Tencent report..