Tencent collaborates to counter Alipay in Japan

Chinese payment companies have successfully lured merchants outside of China by enabling payments for Chinese tourists, a use case Tencent hopes will work in Japan, where rival Alipay lurks.

Tencent Holdings, the Chinese owner of WeChat, is partnering with the Japanese mobile chat provider Line to enable Chinese tourists in Japan to make purchases at local merchants using WeChat Pay.

Qilai Shen/Bloomberg

According to the South China Morning Post, the two companies will provide a combined offering to Japanese merchants that would allow Chinese tourists to use WeChat Pay and local Japanese consumers to use Line’s mobile payment service, Line Pay.

Line will start leasing payment terminals that will be able to accept WeChat Pay beginning around mid-December to small and midsize restaurants and merchants that have not yet adopted Line Pay, according to the Nikkei Asian Review. The service with Tencent is scheduled to start next year.

By targeting merchants who don’t accept Line Pay with the now combined offering, the company is clearly betting that the allure of serving Chinese tourists with WeChat Pay will be enough to get merchants to also accept Line Pay for Japanese consumers.

Much has been made about the value of Chinese tourists and their spending habits. In 2017, Chinese tourists spent over $257 billion while on vacation. This is the largest amount spent by any country and almost double the amount of spend by the No. 2 country, the U.S., which came in at $136 billion.

The move by Tencent is a direct counter to Alipay's activity in Japan. As the largest Chinese messaging and payment mobile app provider, Tencent has much to lose if it allows Alipay to become the primary payment app for Chinese travelers.

Alipay has been following Chinese tourists into Japan by using partnerships and directly signing up merchants in order to enable acceptance of its QR code-based mobile wallet. In December 2017 it reported to have signed up 38,000 merchants in its Japan acceptance network.

In September, Alipay announced it was seeking local Japanese partners to help it deepen its acceptance network in Japan in preparation of a massive tourist boom for the Tokyo 2020 Olympics. The Ant Financial unit stated that 7.35 million Chinese tourists visited Japan in 2017, up 15.4 percent with an economic impact of 1.6 trillion yen (about USA$ 14.3 billion). In the announcement it mentioned that it had entered the Japanese market in December 2015 and was seeking to partner with local mobile payment platforms such as Line Pay and Paypay.