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China’s mobile payments giants WeChat Pay and Alipay have announced new tie-ups with Visa and Mastercard that will open up the country to international card schemes for the first time.
At the summer World Economic Forum (WEF) gathering in Tianjin last week, a Tencent executive revealed that WeChat Pay is almost ready to launch a new integration feature for Visa credit cards issued abroad.
Royal Chen, vice president of Tencent Financial Technology, said that in “mid to late July” the WeChat Pay network will be expanded to Visa and “other international credit card organisations”.
“Foreigners who travel in China typically use their credit card issued by their own country,” he said.
“If you were to tie that with your WeChat account, then you could experience a frictionless payment process — one that’s no different at all compared with that of Chinese citizens.”
Chen said that Tencent-owned WeChat Pay has been looking to integrate its 10m merchants with international card schemes for several years, but progress towards that objective had been put on hold due to COVID-19.
In November 2019, Tencent launched a trial in partnership with Visa, Mastercard, American Express, JCB and Discover Global Network, allowing overseas users to link their credit cards to WeChat Pay.
For the few months China remained open to foreigners after the launch, overseas credit card customers could use WeChat Pay when paying merchants in tourist sectors such as hotels, transportation, shopping and restaurants.
But then in March 2020, China closed its borders to all foreign tourists, and the borders stayed closed until March this year.
During that time, the initial plans to expand the WeChat Pay network were “hindered”, said Chen, but are now back on track.
Mastercard also taps into China
One week prior to Chen’s announcement in Tianjin, Mastercard also announced the launch of a new partnership with WeChat Pay rival Alipay, which will also allow users to link foreign debit and credit cards to the Chinese mobile payments app.
Dennis Chang, executive vice president for Greater China at Mastercard, said the launch was timed to coincide with China’s reopening to foreign tourists after COVID-19.
“As travel and tourism rebound, Mastercard is delighted to partner with Alipay to enable cardholders worldwide to enjoy the ultimate in payments security, convenience and peace of mind during their journeys to China,” he said.
“This next step in the partnership with Ant Group exemplifies Mastercard’s long-term commitment to the China market, and the company’s continuous global effort to power economies and empower people.”
On the Chinese mainland, Mastercard payments that are sent via Alipay will be processed using the Mastercard Payment Gateway Services (MPGS).
The MPGS is an “omnichannel” payments solution that allows merchants anywhere in the world to accept payments online, in-person or in-app, through more than 170 currencies and more than 200 acquirers.
A ‘valuable’ opportunity
In 2019, according to the China Tourism Academy, 145m foreign tourists spent just over $133bn in China — an increase of 3 percent on the previous year.
Speaking with VIXIO, Zennon Kapron, CEO of the Kapron Asia payments consultancy, said there is a “valuable opportunity” for Visa and Mastercard to tap into this market, should tourist arrivals bounce back to pre-pandemic levels.
As was also noted by Mastercard, Kapron said both partnerships will benefit small and medium-sized merchants in particular, which are typically unable to transact with foreign tourists via card due to lack of point of sale (POS) infrastructure.
“Outside of the larger ones, most merchants in China don’t accept foreign credit cards, and many have given up on cards altogether in favour of QR code readers and digital payment methods,” he said.
Lack of POS hardware is not the only reason that card payments are rarely used or accepted in China, said Kapron. Lack of protection against fraud is another reason, and that is covered by Mastercard’s Payment Gateway Services in its tie-up with Alipay.
“Unlike in the UK or the US, if someone steals your card and uses it to make fraudulent transactions, in China you are responsible for the cost,” said Kapron.
“Because of this, at merchants that do accept card payments in China, you often need to insert the card, enter a PIN number and then sign as well, which makes for an incredibly long transaction.”
All of these factors helped China to “skip” card payments, as Tencent’s Chen put it, and go straight to QR code payments instead.
“The QR code payment is our top innovation,” said Chen. “The cost of a QR code payment is incredibly low, and it’s available everywhere.
“It’s available at any cashier, and also you can print it out on a piece of paper and put it anywhere — in the entrance of a parking lot, on social media or even on a T-shirt, as I have seen some young people doing.”
