They have transformed e-commerce in China, but will competition laws and data privacy issues impede their global expansion?
One in three people worldwide owns a smartphone, and that means instant access to a proliferation of apps designed to help them organise their lives. They can order a takeaway, find directions, message friends or hail a cab from businesses like Deliveroo, Waze, Facebook and Uber. Going a step further is the super app, an umbrella concept that will organise all the apps you might need together, creating an ultra-convenient one-stop shop. In China, the super app concept is firmly established in the form of WeChat, which has transformed the way the population accesses goods and services. What started as an instant messaging service in 2011 can now be used for everything from paying bills (through WeChat Pay) to checking social media and booking flights. Since then, the platform has seen astronomical growth and now has 1bn monthly active users.
The ability to make mobile payments quickly and securely is a big part of the success of WeChat. To pay for goods and services, or transfer money to friends, users simply scan a matrix barcode, a QR code, on their smartphone, which then links seamlessly to their chosen banking partner. This preference for mobile payments is turning China into a cashless society (even street performers are using handheld devices to collect money).
The WeChat Pay platform’s ease of use and comparatively low transaction fees has global credit card giants like Mastercard scratching their heads about how they can compete. While the financial services industry as a whole is considering whether a super app platform would both help them remain relevant and increase access to financial services for clients based in China’s ‘Belt & Road Initiative’ markets.
The rise of the urban middle class in other parts of Asia is helping digitally native companies mirror WeChat’s success. Indonesia’s Gojek, which started as a ride-hailing app, has used its large customer base as a springboard to offer a wide range of other functions, including food delivery and financial services. Being an Indonesian-based start-up meant Gojek fully understood its market from the ground up and knew how to navigate local regulations. When the company started adding extra features to become a super app, it tailored them to suit drivers as well as consumers.
Gojek’s rival Grab runs a similar model from Singapore, while in India mobile payment and digital wallet platform Paytm has diversified into gaming and investments.
With 2.4bn monthly active users, Facebook is the obvious candidate to become the WeChat of the Western world, however concerns over data privacy and anti-competition conduct in the US could hamper ambitions. In comparison, the success of WeChat has depended hugely on subsidies from the Chinese government, which has also banned outside competitors like Messenger and WhatsApp.
It’s uncertain just how much access the Chinese government has to the vast amounts of data collected by WeChat, but there are reports of messages being retrieved by the government to assist in criminal investigations, and activity on the super app being used for mass surveillance. This potential invasion of privacy doesn’t seem to have deterred Chinese consumers – once users are signed up to such a life-changing platform, it’s almost impossible to leave.
This bodes well for mobile-first companies hoping to expand in untapped markets like Latin America, where smartphone use is growing exponentially (it’s the world’s second fastest-growing market for mobile subscribers, after Sub-Saharan Africa). Dominance in these markets may just depend on who best understands the local market and is able to break through first.
Alipay was first set up in China in 2004 by e-commerce giant Alibaba. It has grown to offer a vast range of lifestyle services including food ordering and investments. Alipay handles 54% of China’s $15.5tn payments market (compared to WeChat Pay’s 40%). In 2013, it overtook PayPal as the world’s largest mobile payment platform.