Traditional banks aware of threat posed by fintech giants WeChat Pay and Alipay

For many years, traditional banks have dominated the online payment industry. This was achieved through collaborating with financial services companies such as Visa and Mastercard, which provided these banks with branded payment products for consumers to choose from. In recent years however, the traction gained through novel payment methods made by fintech companies such as Tencent’s WeChat Pay and Alipay have caused banks to rethink their traditional payment modes.

During the Rise Conference in Hong Kong, Jing Ulrich, vice chairman Asia Pacific at JPMorgan Chase acknowledged the superior processing capacity of WeChat Pay and Alipay . To exemplify that, she cited how JPMorgan’s QuickPay system processes 94 million payments yearly while Tencent managed to process a staggering 46 billion payments over the course of Chinese New Year. JPMorgan is not the only bank that has noticed the rise of WeChat and Alipay. Goldman Sachs has also recently published a report acknowledging how China’s third-party transactions have increased 74 times from 2010 to 2016 (US$155bn to US$11.4tn).

While one may argue that these traditional banks operate in different geographical markets from WeChat Pay and Alipay, the same clash of titans can be seen in China, with the fintech giants coming out on top to rule the roost. Banks like ICBC and Bank of China have conventionally cooperated with card payment network operator UnionPay. However, in recent years, these banks have increasingly switched their allegiance to WeChat Pay and Alipay. In fact, some have questioned the relevance of a card company like UnionPay in a market that has rapidly changed over the course of a few years. Although UnionPay enjoys a state mandated monopoly over all card-based payments in China, and can even point to a 35 percent year-on-year growth rate in 2016, this pales in comparison to the WeChat payment app which saw an 85 percent growth over the same time period, a gap that is set to further widen in the future.

Not only are traditional banks threatened by WeChat Pay and Alipay’s growing dominance in the online payment industry, their conventional dominance in trading platforms have also been eroded by the rise of mobile trading platforms. In Q2 2017, Goldman Sachs’ trading revenue fell by 17 percent while JPMorgan’s revenue fell by 14 percent to US$4.8bn.

Alipay and the WeChat app have revolutionized the way we thought about the payments industry. A simple scan of a QR code has now replaced the cumbersome method of credit card swiping. In this respect, banks have been put on alert that they too would need to play catch up. In China, UnionPay was actually the first to develop QR code technology. However, their failure to capitalize on the first mover’s advantage, coupled with the nimbleness of fintech companies like Tencent and its WeChat Pay, have resulted in a heavy defeat, one that experts seriously doubt they can ever recover from. As a result, banks in China have increasingly aligned their objectives with fintech companies and it appears certain that global banks would have to go down the same path.

About FOMO Pay Pte. Ltd

FOMO Pay is an authorized partner of WeChat Pay, Alipay, UnionPay, Baidu Wallet & BestPay in Southeast Asia, and was selected as one of the Top 100 Asian Companies by E27, Top 100 Startups by Red Herring Asia, and Top 8 by DBS’ FinTech Accelerator Program, Top Fintech Startups in Singapore by Fintech Asia. FOMO Pay provides a one-stop solution for local merchants by facilitating payment collection from China market, including Chinese tourists. This comprises of online payment and in-store payment modes. FOMO Pay’s business solution serves clients from a wide range of industries, including the telecom, publishing, tourism and hospitality, F&B, education and retail industries.