TikTok owner to challenge Alibaba and Tencent
By Erik Wernberg-Tougaard
Bytedance, the company behind the popular video-sharing app Tiktok and its Chinese sister Douyin, is launching its very own payment solution for its Chinese consumers. THE COMPANY IS NOW SUING TENCENT FOR MONOPOLISTIC BEHAVIOURS, WHILE TRYING TO BREAK THROUGH THE FIERCE COMPETITION BY HANDING OUT MORE THAN 1 BILLION RMB ($185 MILLION) IN VOUCHERS AT THE ANNUAL CHINESE NEW YEAR GALLA.
By introducing Douyin Pay in China, Bytedance is entering the Chinese mobile payment market, which is currently dominated by Alibaba’s Alipay (54% market share) and Tencent’s Wechat Pay (39% market share). The battle will be tough, but Bytedance is hoping for large scale adoption, as the company has just won the bidding to be this year’s exclusive sponsor at the Chinese New Year Spring Festival Gala, the most watched TV show on the planet
The Chinese version of TikTok, Douyin has for years been fully integrating e-commerce, and payments via Tencents Wechat Pay or Alibaba´s Alipay is still possible.
China leads on digital payments and digital currencies
E-wallets and mobile payments are nothing new in China. China is the largest digital economy in the world and is already far ahead of the rest of the world when it comes to digital payments. In 2020, China had over 850 million mobile users and hereof at least 765 million had completed one or more mobile transaction a year. The total transaction value of China’s digital payments segment is estimated to reach almost 3 trillion USD in 2021, and according to the latest projections, China will hit nearly 1 billion digital payment users in 2021.
The number of mobile users is constantly growing. For this years Chinese New Year fewer people will be travelling and more people will have to order online.
But China is not only ahead when it comes to digital payment solutions. With the introduction of an official, digital currency China is taking a further step on its digital transformation journey. When launching an official digital currency, the tech giants will no longer have a duopoly on digital payment solutions and the power will flow back in the direction of the state.
This happens alongside tighter regulations for the tech giants, which was exemplified by Ant Financials IPO being taken of the table following Jack Ma’s speech about slow progress and innovation among Chinese regulators. It may therefore become increasingly difficult for the existing players such as AliPay, Wechat Pay and now Douyin Pay to compete in the arena of payments.
Competition is fierce, and currently Tencent´s Wechat is preventing users from sharing content from Douyin. According to Reuters, Douyin has in an aggressive move sued Tencent Holdings (owner of Wechat) for alleged monopolistic behavior, and asked for 13.94 million USD, so the battle is on.
1.2 billion will be watching with Douyin Pay
Bytedance’s CEO, Zhang Nan, has announced that Douyin will be an exclusive partner of the Spring Festival Gala 2021 TV show next week. The Gala is broadcasted on the eve of the Chinese New Year, which last year had over 1.2 billion viewers, making it the world’s most-watched TV broadcast.
During the show, Douyin will have the exclusive right to sponsor and issue 1.2 billion yuan (185 million USD) in the form of ’red envelopes’ directly to the viewers.
The red envelope is a traditional Chinese monetary gift signaling future prosperity that parents and grandparents usually give to their children. It is also what brands typically hand out as coupons or vouchers. It is now commonplace to use mobile platforms to send digital ’red envelopes’.
The hosts of the Spring Festival Galla will reveal a code which the viewers will have to use on their phones to get the red envelopes. The move is a scoop for Douyin Pay and can potentially attract hundreds of millions of consumers onto Douyin Pay´s platform.
It remains to be seen whether Douyin Pay will become a threat to Alipay or Wechat Pay, but there is no doubt that the exclusive partnership is a major opportunity for Bytedance, and something that the two tech giants Alibaba and Tencent follow closely.
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