Commanding 92% of the Home Market, It’s No Wonder Chinese Mobile Giants Are Looking Abroad

One reason China’s Ant Financial Services Group and Tencent Holdings Ltd. are interested in facilitating mobile payments for Chinese travelers in foreign markets, including the United States, is that both companies are topping out in their home market.

Combined, Ant’s Alipay and Tencent’s WeChat Pay controlled an estimated $15.5 trillion in mobile-payments volume at the end of 2017, according to numbers compiled by investment-data firm CBInsights and released last week. That’s a whopping 92% of the total mainland market, the firm says.

What’s more, Alipay and WeChat Pay are rocketing toward 100% market share. The two services combined for $1 trillion only three years ago. That was already a heady total. Then, in 2016, mobile payments for the two companies went into hyperdrive, reaching $9.2 trillion in 2016.

Partly as a result, Ant now commands a $150 billion valuation, more than the value of several major financial institutions around the world, CBInsights points out, including Royal Bank of Canada and Santander Group.

To begin tapping transactions overseas, Ant has signed agreements to let Chinese visitors use Alipay at popular tourist destinations. One prominent example is its May 2017 deal with First Data Corp., which aims at enabling Alipay at some 4 million U.S. merchants. Tencent, too, is rapidly expandng WeChat Pay usage in the United States for Chinese visitors.

The U.S. market is an obvious choice to pick up incremental volume. In 2016, the latest year for which numbers are available from the U.S. Commerce Department, 2.97 million Chinese travelers spent some $33 billion in the States, a 9% jump over 2015. China now accounts for more tourists to U.S. shores than any other country besides the United Kingdom and Japan.

The opportunity here isn’t limited to overseas mobile-payments giants. The need to prepare U.S. stores for smart phones using quick-response codes to complete transactions—the technology both Alipay and WeChat Pay rely on—created an opening for companies like Citcon USA LLC, a Santa Clara, Calif.-based startup founded by Chuck Huang, a former Visa Inc. executive.

Depending on the merchant’s existing technology, Citcon either installs new point-of-sale devices that can run transactions with QR codes or allows merchants to rely on Citcon’s application programming interface. The company says it has wired 5,000 merchants with about 10,000 locations so far and expects that count to grow fast, reaching some 2.5 million merchants within a year.

The simplicity of the relatively inexpensive QR-code technology accounts for at least some of the speed with which Alipay and WeChat have been able to grow, Huang argues, contrasting the technology with the near-field communication option major third-party wallets like Apple Pay have adopted. QR codes connect phones to the point of sale via a quick scan of a familiar pattern the merchant can display with something as simple as a sheet of paper.

“It’s happening everywhere,” Huang warns. “The payments industry needs to support this solution.”