Earlier this month, Novatti, an Australian fintech company, announced a deal with RoyalPay, the Australian payments service provider for WeChat. Novatti will facilitate the payments between two parties using WeChat Pay. This announcement heralded the entry of WeChat Wallets into Australia, and investors rejoiced, driving Novatti shares up 67 percent.
So why is this a big deal?
In the same week of the announcement, Tencent (parent company of WeChat) overtook China Mobile to become Asia’s most valuable company, with a market capitalisation of $255 billion USD. To put that into perspective, that’s more than double Australia’s largest company: CBA.
The WeChat messaging app has over 800 million monthly active users, with 400 million of them using WeChat Pay. Now, the news about WeChat Pay coming to Australia stirred my interest. WeChat Pay has fundamentally changed the way Chinese consumers make payments. I spoke to my friend Jonathan who’s currently studying in China (using WeChat of course, since Facebook and Whatsapp is blocked).
A: Can you tell me a bit about WeChat Pay and your experience using it?
J: There are two types of transaction methods – you can either directly transfer money to another party or you can pay for things at a store.
A: How does it work?
J: So firstly, you can transfer money directly from your WeChat Wallet to anyone in your WeChat contact list. You can top up your WeChat Wallet by using a Chinese credit card or bank account. Obviously you’re also able to withdraw the money too.
A: And paying at stores?
J: The app generates a one-time QR code and the cashier scans it. It’s that simple. The check-out process is actually a lot quicker than if you were using cash or card.
A: Can you give me an example of shops that accept WeChat Pay?
J: You can pay for meals at restaurants, taxis, most shops actually… it’s so easy to make payments. Smaller shop owners can scan the QR code with their phone and receive the payment. Bigger stores have dedicated scanning machines, made especially for WeChat payments. You can make a payment to anyone that has the app in China. All they need to do is scan the QR code with their phone’s camera.
A: Do you use WeChat Pay every day?
J: Yep, I can recharge my University account, pay for rent, internet, phone bill… pretty much everything.
A: Could you go a day without your physical wallet?
J: Yep, easily. Now that I think about it, I do it all the time…
This revelation stunned the both of us.
Now you may be thinking, how does this affect me as an average Australian?
Since WeChat Wallets must be connected to a Chinese credit card or bank account, the inaugural users will be Chinese tourists and students. Over 1 million tourists from mainland China are expected to visit Australia this year, and Chinese students make up roughly 30% of all international students enrolled in Australia. An estimated $2.5 billion AUD will be spent on retail goods by Chinese tourists alone in Australia this year…
So while the initial rollout of WeChat Pay in Australia will be restricted to Chinese consumers, the potential to tap the broader Australian market is at the forefront of everyone’s mind.
I caught up with Alex Scandurra, CEO of Stone & Chalk which is hosting RoyalPay.
‘Clearly the leading use case is likely going to be tourists coming over, so the question for me, and for everyone is going to be, is it really going to extend beyond that? How they go about doing that and how aggressive they’re going to be is really the question. My gut would be that they’ll see how they go with the tourist market first, learn from that, and then maybe use [Australia] as a test-bed before going to a major Western market. […] I think that Apple Pay and others will have an interesting run for their money.’
As Australian banks and industry players continue to compete for ascendancy in the digital wallet market, a new player from Asia has emerged. WeChat’s success in its foray into payments is ultimately driven by its seamless integration of a social media/communications platform with a payments service.
With the New Payments Platform going live next year and mobile payments hot on the agenda, the Australian payments landscape is shaping up to be a highly competitive playing field. Will WeChat Pay be as successful here in Australia? Who knows. But this intensified competition forces banks and fintechs alike to innovate and provide the best payments solution for customers, as they tussle for market share. This will essentially lead to more choices and a better payments experience for all of us. And I for one am excited to see what’s in store for the future of Australian payments. Bring on 2017!
If you’d like some more background on the importance of WeChat in China, feel free to have a read of WeChat: you benefit. Social media on the other side of the Great Firewall.