Almost unnoticed Tencent, the Shenzhen based technology outfit, became the 10th most valuable listed company in the world, replacing US bank Wells Fargo, as its market capitalisation climbed through $US279 billion ($372 billion).
It now sits among the world’s tech elite, in a top 10 which includes Apple, Alphabet, the parent company of Google, Microsoft, Amazon and Facebook.
And while Tencent, best known for its messaging app WeChat which has 768 million daily active users, is new to this group, its membership is unlikely to be fleeting. That’s because the Hong Kong-listed company has done more than just appropriate the best aspects of foreign technology and put them behind China’s Great Fire Wall – where the likes of Google and Facebook are banned.
Certainly it’s done some of this, but there’s also been plenty of unique innovation along the way, some of which is now being copied by the likes of WhatsApp, owned by Facebook.
This goes against the old narrative of China as the “copycat nation”, while signalling mainland technology companies are increasingly making their mark globally and have become brands in their own right.
Inevitably, this will result in WeChat coming up against its US rivals, though the nature of this competition will be different from traditional battles to secure market shares and users.
“WeChat is not going to take over the world,” says Peter Cook, the chief executive of ASX-listed payments company Novatti. “But it will be used by those wanting to interact with Chinese people and sell things to Chinese consumers.”
Replacing Shopping Experiences
In China, where cash is no longer king, purchases are increasingly made via mobile phones. When buying from a small shop, the consumer usually scans the merchant’s QR code, enters the amount owed, puts in a password and then the money is transferred.
At larger shops or chain stores it’s the other way round, with the merchant scanning the consumer’s QR code, which is slightly quicker and does not require a password. The phenomenon of QR codes for payment is largely unique to China as consumers believe it’s more secure than other forms of mobile payment (although there have been some scams recently).
And while Alipay, an affiliate of Alibaba, is the incumbent and leader in China’s mobile payment market, WeChat Pay is fast catching up. It already boasts more daily transactions, an astronomical 600 million, although by value Alipay is well ahead given the dominance of its Taobao marketplace and virtual shopping centre T-Mall.
“If you only offer Visa or MasterCard, then many Chinese consumers will not be able to pay,” says Cook.
That’s potentially a large market to forgo given more than a million Chinese tourists came to Australia last year and around 200,000 Chinese students are in the country at any one time.
The other way WeChat is finding its way onto smartphones in the English speaking word, is via those doing business with China.
This is increasingly done via WeChat’s messaging service or call function rather than email or a traditional phone line.
Sydney-based private bank, Atlas Advisors told this newspaper it uses WeChat to send out investment memorandums for its early stage venture capital fund, as its Chinese clients don’t use email.
It’s the same for lawyers arguing over the finer points of a contract or personal shoppers marketing vitamins or cosmetics to clients in China. “WeChat has developed its own ecosystem; it’s like an alternative internet or a super app,” says Cook.
Rather than opening separate apps for different functions, it allows users to book a taxi, order food, buy an airline ticket, reserve a hotel room, extend a library book loan or check for speeding fines all within the WeChat app.
You can even report a polluting company, apply for a travel pass to Hong Kong, check if tax invoices are genuine and pay court fees.
Basically anything you want to do online can be done from WeChat along with using its messaging system, making video calls or posting photos and comments to its social media platform.
This makes WeChat a combination of Facebook, Amazon, WhatsApp and ApplePay with a bit of Uber and Airbnb thrown into the mix.
But unlike its big global peers, not all of WeChat’s functions are available outside China.
The main roadblock is China’s closed capital account and the inability to link a foreign credit card to WeChat wallet. Instead, a local bank account is required, which is an insurmountable hurdle for most foreigners not resident in China.
This may change as China has stated a desire to gradually open its capital account, although progress in this area has stalled in recent years.
Such limitations have allowed WeChat’s global peers to toy with the idea of copying its payments function.
In what could be seen as the ultimate compliment, WhatsApp is now likely to launch its own peer-to-peer payments service in India, something WeChat has had up and running for years in China.
On a visit to India in February, WhatsApp co-founder Brian Acton said the company was in the “early stages” of seeing how it might include payments functions in its app.
WeChat has little ability to respond to this and for now has to be content with its not insubstantial home market, although it has made some investments offshore.
Last month, it paid $US1.78 billion for a 5 per cent stake in US electric car maker Tesla, while at home it has taken stakes in JD.com, China’s largest retailer and riding hailing app Didi, which prevailed against Uber’s challenge.
The investments in Didi and Telsa appear to be bets on electric cars and shared cars eventually becoming self driving cars, a revolution Tencent clearly wants to be a part of, which may help it remain as one of the world’s 10 most valuable companies, long after mobile payments and WeChat’s much heralded ecosystem have been commoditised.