QQ Wallet withdrawal fees reveal that WeChat is reducing its forces to focus on competing with Alipay

At the beginning of 2018, QQ Wallet announced that it would start charging a withdrawal fee from January 8, and each QQ Wallet user would only have a free withdrawal limit of 1,000 yuan. In the entire mobile payment landscape, charging has become a trend, including WeChat Pay and Alipay charging in 2016.

But the question is, why did QQ Wallet only start charging after nearly two years? What is Tencent's strategic thinking behind this?

Mobile payment charges

According to an official announcement from QQ Wallet, starting from January 8, 2018, each user (all accounts corresponding to the same ID card) will have a cumulative free withdrawal limit of 1,000 yuan. A handling fee of 0.1% will be charged for the excess, with a minimum charge of 0.1 yuan per transaction, which is exactly the same as the charging rules of WeChat Pay.

At the same time, the rules also state that, except for cash withdrawals, no fees of any kind will be charged for other functions such as payment, transfer, and red envelopes.

In fact, all third-party payment platforms need to pay a handling fee to the bank when making transfer transactions with users. In order to balance the pressure of expenditure, WeChat Pay and Alipay have already started charging mode, and this round of QQ Wallet's actions can be said to mark that almost all mobile payment giants have closed the free window.

Leifeng.com found that the earliest charging model was launched in February 2016, when WeChat issued the "Announcement on the Adjustment of Transfer Fees to Withdrawal Fees", stating that from March 1, WeChat Pay would start charging a handling fee for the withdrawal function, with a minimum of 0.1 yuan per transaction. From the same day, the handling fee for the transfer function would stop being charged.

Kou Xiangtao, a researcher at Xunlian Research Center, once told Leifeng.com that although WeChat charging is a commercial decision, it is more of a "tactical purpose" behind it.

• Promote the transformation of WeChat Pay from red envelopes to consumption scenarios, and enhance users' awareness - WeChat Pay is not only used for sending and receiving red envelopes once a year, but also a payment tool for daily life, so that inactive users can move;

• Encourage WeChat Pay users to conduct fund management in Wealth Management as much as possible, thereby increasing revenue;

• Improve the card binding rate.

There was an interesting episode during this period. Shortly after WeChat announced that it would charge a withdrawal fee, Alipay’s official Weibo account posted a post jokingly saying: “I will give a unified reply: Alipay withdrawals are free!”

Seven months later, in September of the same year, Alipay issued an announcement stating that starting from October 12, 2016, Alipay will charge a 0.1% service fee for individual users' withdrawals exceeding the free limit (20,000 yuan).

In response to the charging measures, both WeChat and Alipay gave the reason of "increasing operating costs."

QQ Wallet Status Change

Wang Pengbo, a financial payment analyst at Analysys International, told Leiphone.com that QQ Wallet did not join the charging trend in the early days, mainly because it accounted for a very small proportion of the entire Tencent financial transaction scale, and whether it charged fees or not did not have much impact; now, after nearly two years, it has restarted the withdrawal fee, mainly to respond to Tencent Group's layout in the field of mobile payments - focusing its firepower on the competition between WeChat Pay and Alipay, while QQ Wallet adopts a strategy of saving money.

As far as the entire mobile payment market is concerned, it is almost monopolized by Alipay and Tenpay. Tenpay is composed of WeChat Pay and QQ Wallet in Tencent's mobile payment system. However, the presence of QQ Wallet has changed from strong to weak.

In January 2014, QQ Wallet was first launched on QQ Mobile. The massive platform users and the two-year red envelope war led to the rapid growth of QQ Wallet. Tencent's financial report shows that during the 2016 Spring Festival holiday, the number of red envelopes sent and received through QQ Wallet reached about 6 billion in 6 days, and the number of monthly active users of QQ Wallet exceeded 100 million.

Industry insiders told Leifeng.com that QQ Wallet was initially established to fill the gap in WeChat's younger user base and in fourth- and fifth-tier cities. Zheng Haojian, general manager of QQ Wallet, also told the media, "After analyzing the data accumulated by QQ over more than ten years, its huge number of QQ users are mainly concentrated in third-, fourth- and fifth-tier cities. Therefore, for users who have not opened WeChat Pay, QQ Wallet is a good supplement."

However, as the WeChat market continues to expand and penetrate into fourth- and fifth-tier cities, the position of QQ Wallet in Tencent's mobile payment system has gradually become awkward. Wang Pengbo also told Leifeng.com that Tencent has made a strategic choice to charge a fee for cash withdrawals from QQ Wallet, as the growth rate of its user base has slowed down. In fact, it is to stop subsidizing and save money, and focus on WeChat payment.

Competition in the mobile payment industry is fierce

The domestic mobile payment war has been going on for a long time.

According to the data from the "China Third-Party Payment Mobile Payment Market Quarterly Monitoring Report Q3 2017" released by Analysys, in the third quarter of 2017, the ranking of the top three in the mobile payment market remained unchanged, still nearly monopolized by Alipay and Tencent Finance, with One Wallet accounting for 1.26%.

Among them, Alipay continued to invest heavily in offline code scanning business in the third quarter, especially the continuous development of merchant needs, which led to explosive growth in the transaction scale of its consumer business and personal transfer business. In addition, Ant Financial vigorously promoted more types of financial products, and the transaction scale of Alipay's financial business also maintained rapid growth, ultimately allowing Alipay to occupy 53.73% of the market share.

Benefiting from the continuous investment in offline mobile payment scenarios, Tencent Finance's personal service transaction scale continued to show explosive growth in the third quarter, especially the personal transfer business. In addition, due to the WeChat portal advantage and continuous product optimization, Tencent Finance's credit card repayment business transaction scale also maintained rapid growth, and finally Tencent Finance's market share increased to 39.35% in the third quarter.

As the market share has been divided up to a small extent, the competition between Tencent and Alibaba in the field of mobile payment has gradually evolved into a close combat. On July 31, 2017, in Guangzhou, WeChat Smart Workshop, WeChat Pay announced that it would hold the "88 Cashless Day" for the third consecutive year starting from August 1. WeChat has invested huge amounts of money to promote payment through channels such as incentives, vouchers and cash red envelopes.

On the same day, Alipay announced that it would launch a cashless week in August, during which more than 10 million offline merchants will participate. Alipay users nationwide will have the opportunity to receive bonuses of up to 4,888 yuan if they spend more than 2 yuan at merchants that support Alipay payment. At the same time, Alibaba Group launched the "88 Membership Festival" for the first time, bringing more than 10 billion yuan in benefits from domestic and foreign brands to support Alipay's cashless week activities.

Overseas, Tencent and Alibaba have also accelerated their pace of mobile payment expansion. Since Alibaba established an international business unit dedicated to overseas market development in 2012, it has developed business in more than 26 countries and regions. WeChat has been planning overseas payment since 2011 and reached a strategic cooperation with American Express to provide online shopping services for Tenpay customers in the United States and the United Kingdom. By the end of 2015, WeChat Pay announced that it would fully open WeChat payment capabilities to overseas merchants. Currently, Tencent Pay has landed in more than 13 overseas countries and regions.

From the trend point of view, TheStreet concluded through an analysis report from Singapore's United Overseas Bank that according to the volume of Tencent's Tenpay transactions exceeding 600 million in December last year, Tenpay is expected to surpass Alipay in 2018. The Wall Street Journal also reported that according to iResearch data, in mid-2014, Alipay's mobile payment market share in China was close to a monopoly of 80%. However, as of the end of June this year, Alipay's share has steadily declined to slightly above 50%, and Alipay's market share is declining rapidly.

With the gradual popularization of offline mobile payments, the firepower between Alibaba and Tencent is concentrated on seizing as many payment entrances and scenarios as possible. Tencent no longer has the extra energy to divert to QQ Wallet. After all, the time window for the entire industry's competitive landscape is running out.