China’s regulatory authorities have requested Tencent Holdings to decrease the mobile payment market share of WeChat shortly after the launch of the digital yuan pilot in Hong Kong.
According to Nikkei sources familiar with the situation, Chinese regulators are pressuring Tencent Holdings to reduce the market share of its WeChat app in the mobile payment sector. The focus of this request is primarily on in-person payments made through QR codes rather than online shopping.
Although the specific targets for the reduction of WeChat Pay’s market share have not been revealed, a source close to the company mentioned that WeChat is not focusing on expanding its user base and is wary of the potential risks associated with becoming too dominant in the market.
China’s mobile payment landscape is currently dominated by WeChat Pay and Ant Group’s Alipay, despite the presence of numerous non-bank payment institutions. The motive behind the regulatory pressure remains unclear, but it coincides with Beijing’s push to encourage the use of the digital yuan, also known as e-CNY.
The digital yuan has faced challenges in gaining widespread acceptance since its pilot launch in 2020, with concerns raised about the lack of interest and limited usability. The recent development comes shortly after the digital yuan became available in Hong Kong, with residents able to top up their digital wallets through local banks but restricted from peer-to-peer transactions.
China’s mobile payment market is highly profitable, with total transactions exceeding 92 trillion yuan in the first quarter, including a significant portion from QR code transactions. The directive to Tencent from the Chinese government appears to be part of a broader strategy to prevent private tech companies from overshadowing the state-backed digital currency. By reducing WeChat Pay’s market share, Beijing aims to create space for the digital yuan to thrive and become an integral part of daily financial transactions.
In related news, WeChat has recently introduced support for digital yuan payments, aligning with China’s efforts to promote the adoption of the state-backed digital currency.