Huawei’s Acquisition of Chinese Payments License Could Break Dual Dominance of Alipay and Tencent

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Telecommunications giant Huawei is making preparations to enter China’s payments sector, in a move which could shake up the existing dominance of long-standing incumbents Alipay and Tencent amidst efforts by regulators to step up anti-trust measures.

Huawei is currently in the process of seeking approval from Chinese regulators for its acquisition of Xunlian Zhifu (讯联智付) – a company which holds a much-coveted payments license for China’s domestic market.

Should Huawei obtain control of Xunlian Zhifu it will become the second mobile phone manufacturer in China after Xiaomi to obtain a payments license, and mark its official entry into the Chinese payments market.

Sources have also said to Cailianshe that Huawei is currently in the process of recruiting a large volume of new personnel for payments-related roles, including payments and clearance positions, deposit management and routing, as well as roles for cooperation with banks.

Analysts say a concerted push by Huawei into the Chinese mobile payments market could serve to disrupt a sector still very much under the thumb of established incumbents Alipay and Tencent.

Alipay and Tencent have long enjoyed an overwhelming dominance of China’s mobile payments sector, with market shares of 54.5% and 39.5% respectively as of the end of 2019.

Analysts also point out that the recent launch of anti-trust regulations – some specifically targeting the payments sector, favours the ascent of new companies in the sector.

On 20 January the People’s Bank of China (PBOC) issued the draft version of the “Non-Bank Payments Organisation Regulations” (非银行支付机构条例(征求意见稿)) for the solicitation of opinions from the public, which empowers PBOC to dismantle third-party payments platforms that abuse their market dominant position.

Under the draft regulations PBOC may issue a warning and recommend the adoption of measures including “regulatory discussions” under the following circumstances: 

  • A non-bank payments organisation has a one-third share of the non-bank payments services market, 
  • Two non-bank payments organisations have a combined share of one half of the non-bank payments services market,
  • Three non-bank payments organisations have a combined share of three-fifths of the non-bank payments services market.

The draft regulations also provide clear definition of a “market dominant position,” which include:

  • A non-bank payments organisation has a one-half share of the national electronic payments market, 
  • Two non-bank payments organisations have a combined share of two-thirds of the national electronic payments market,
  • Three non-bank payments organisations have a combined share of three-quarters of the national electronic payments services market.

In addition to Huawei and Xiaomi, other tech giants in the online sphere have made haste to grab Chinese payments licenses of their own since the start of 2020, primarily via the acquisition of licensed subsidiaries.

These include Pinduoduo – which acquired Fufeitong (付费通) in January 2020; Trip.com, which acquired Dongfang Huirong (东方汇融) in September, and TikTok-owner ByteDance, which acquired Hezhong Zhifu (合众支付) in the same month.

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