China mobile payments market to expand as Tencent-Alibaba rivalry heats up

While the mainland's banking industry remains behind those of more developed economies, the country is witnessing a rapid expansion in its online and mobile payment market as competition intensifies in the internet sector.

Shenzhen-based Tencent, the largest internet company in Asia, stepped up the pace last week by offering payment services through its popular mobile messaging application WeChat, known as Weixin on the mainland.

That marked a stinging broadside against the mainland's e-commerce giant Alibaba, which runs the domestic market-leading online and mobile payment platform Alipay.

The stakes are high for Tencent, Alibaba and other domestic providers of payment platforms. Internet consultancy iResearch forecast the gross merchandise value of the mainland's third-party online payments market would reach 18.5 trillion yuan (HK$23.4 trillion) by 2017, up from 5.4 trillion yuan last year.

By 2017, more than half of such transactions were expected to be made on smartphones and media tablets, iResearch said. It projected the gross merchandise value of the mobile payment segment would hit 11.9 trillion yuan in 2017, a huge jump from 1.2 trillion yuan last year.

The rise in mobile payment transactions will likely follow the increase in the number of people who access the internet on their mobile devices. Data from the China Internet Network Information Centre showed there were 618 million internet users on the mainland at the end of December, with about 500 million using smartphones and tablets to go online.

Ricky Lai, a research analyst at Guotai Junan Securities, said: "The mobile internet is expected to maintain robust growth on the mainland because of the proliferation of smartphones, the shift of more 2G subscribers to 3G or 4G services and the wider adoption of popular apps like WeChat."