Tencent chats top Oz bank

George Lekakis
One of China's fastest growing digital wallet providers , WeChat Pay, is preparing to deepen its presence in the Australian market next year in an effort to upset the first-mover gains made by its native payments rival, Alipay.

WeChat Pay is a subsidiary of Shenzhen-based ecommerce giant Tencent Holdings Ltd, which also owns the popular and controversial WeChat mobile messaging and social media service.

Tencent is also poised to begin a rollout of another financial services arm - WeBank - which is China's fastest growing standalone internet bank.

Rumours that Tencent is planning a big expansion in Australia intensified last month after senior executives visited Sydney and Melbourne.

The Tencent executive team completed a three-day roadshow in the Australian cities with a view to raising awareness of local institutional investors about its global ecommerce strategy.

The non-deal roadshow was managed by Macquarie Capital and highlighted Tencent's aspiration to grow its payments and financial services activities in Australia.

Since then a boutique Adelaide law firm has been quietly laying the groundwork for the launch of several Tencent businesses, including the WeBank platform.

ASIC records show that Tencent Holdings set up a development company in the northern Perth suburb of Duncraig two years ago.

The ASIC-registered company, which trades as Tencent Pty Ltd, is managed by Chinese-born businessman Richard Lee.

Tencent and Alipay compete aggressively for customers in China's burgeoning digital wallet market.

Tencent claims to have 600 million digital wallet users in China, which is about 100 million more than Alipay.

However, Alipay is believed to have accounted for more than half of all transactions using digital wallets last year.

Alipay has stolen a march on its rival in Australia after forging partnerships with local banks and merchants since last year to embed acceptance of its service in the local payments system.

It scored a breakthrough deal last month after National Australia Bank agreed to link its 150,000 Eftpos terminals to the Alipay platform.

Tencent's presence in Australian payments remains fairly modest, with only about 10,000 local merchants signed up to accept WeChat Pay.

Alipay and Tencent are vying to win the loyalty of more than 1.7 million Chinese tourists and students who spend around A$12 billion in Australia each year.

Tencent is believed to be already in talks with major Australian banks so that WeChat Pay users can pay for goods and services when they shop at local merchants.

While Alipay has secured a first mover advantage Down Under, Tencent will be looking to leverage the popularity of its WeChat messaging service in Australia.

Around four million people subscribe to WeChat in Australia and research published by AdNews indicates that around 38 per cent of local users do not speak Cantonese or Mandarin.

This suggests that Tencent has potential to expand as a domestic payments provider to non-Chinese customers.

Most payments experts say they are not surprised by Tencent's effort to deepen acceptance of its digital wallet across Australia.

Glenn Stafford, the managing director of Sydney payments consultancy PerformPlus, says the business models underpinning WeChat Pay and WeBank are more than likely to succeed in Australia.

"I do not see any major hurdles for WeBank to get an Australian banking licence provided they meet all the requirements," he said.

"Their business model, especially leveraging the WeChat messaging platform, is a very successful model as already proven by WeBank in China and by KakaoBank/Kakao in South Korea.

"With over one million tourists visiting Australia every year from China and Chinese students making up over thirty per cent of all international students in Australia the reality is that WeChat and WeBank are already here."

While there is little doubt that the Tencent businesses are positioned to grab a slice of the Australian payments pie, it will be interesting to see whether operational and privacy risks associated with the WeChat service might stymie the growth plans.

Earlier this year the Federal Department of Defence announced a ban on the use of WeChat apps on all of its computers and digital devices after it established that the Chinese Government had unfettered access to all data transmitted via the messaging service.