Alipay & WeChat: expansion into Russia and overseas markets

The most successful fintech companies of today are not fintech at its core, or don’t focus on fintech solely. Fintech is not supposed to exist and flourish without additional values, as current practices show us. Payment process is getting invisible, and the better it’s hidden, the best focus business can allocate to its best proposition.

Lifestyle first, payments second

What happened in China makes now the whole world pay very close attention to. First, back in 2004 when Alipay appeared on Taobao as an escrow system, slowly evolved as a seller accreditation, partnered with all major Chinese banks, offered daily payments, and accounted for 200 e-wallet and 10 million app installs – no one raised a brow. Second, at the beginning of 10’s extremely popular in China, QQ social messenger and network ventured into somewhat free-will mobile app – now called WeChat, which allowed businesses to reach users directly. The instrument chosen existed long before – the QR code, which merely led to the brand or business channel within the messenger.

From that point forward things accelerated to rocket speed, and Alipay managed to sew together the mosaic of financial and not-so services – investments, loans, crowd-funding, deposits, digital banking, tax-free, tickets to all transport, concerts, marketplace, bonuses, taxis, bike sharing, food delivery, all things delivery – you name it. The whole ecosystem of the things you were used to finding at different apps or places, all gathered into one place at blistering speed. WeChat was no loser in this race, as it was a lifestyle app first, payments coming second.

Post payment era?

From its inception, Alipay was no less a B2B service, as it was a B2C one. It is underlined by the fact that it was scoring sellers on Taobao, indexing Chinese ecommerce enterprises, developing a credit scoring for their customers, and enriching the scoring data more and more. Calling Alipay an e-wallet involuntarily guides us in stereotypical thinking of the ecosystem goal. What if you start calling Alipay a scoring system, that continues to build on not only payment, but behavioural data, location data, that exists within a lifestyle ecosystem, closely connecting businesses with their customers, fuelling new consuming habits and ceremonies like red packets, enables personalized pricing models? I bet this starts to change your perception.

Then, is WeChat a messenger with payment function? Or is it a digital key, all-encompassing platform, authorization system, new media, super-ID? Can their fintech part exist without everything else? As Tencent’s own Pony Ma puts it: WeChat is about saving trouble.

Both systems are elbowing in attempting to implement their vision on other markets as well. They do so either by following their citizens to other countries simply as servants, or buying stakes in upcoming foreign fintechs, or going all-in to certain markets.

Alipay & WeChat on the Mother Russia ground

Back in 2014 with the start of the latest financial crisis, Russians suddenly found their usual purchases on the US & EU websites 2-3 times more expensive, and diverted their eyes to much cheaper analogues traded on the Chinese websites. Price suddenly sky-rocketed among the reasons to buy stuff overseas, read China, compared to other available options, including local merchants. This was the moment when AliExpress, owned by Alibaba and designed for foreign markets, started its triumphant path to the Russian online retail kings. For some Russian shoppers it was the website they made their first online purchase ever, for others it was the only viable option to get stuff they wanted and couldn’t find locally.

That was the path that Alipay entered into the Russian B2B market – servicing AliExpress transactions and establishing its first relationships with Russian banks and partners, among which there were VTB, Yandex.Checkout, Qiwi. In 2016, Alipay finally found resources and set KPIs to get into the local payments market for Chinese citizens, which now account for 1.5 million visitors annually. Suddenly, Russia became an eye-candy destination for Chinese tourists, as well as luxury shopping spree destination.

In 2017, Alipay has integrated with Russia’s largest acquirers that in turn pushed for POS updates to offer Alipay in major tourist destinations: largest Moscow and St Petersburg retailers, airport duty-free stores, museums ticket offices. Since its first entry, Ant Financial is evaluating M&A or investment opportunities with local players, most prominently the recently discussed JV opportunity between Alibaba & Sberbank that owns Yandex.Checkout, Alibaba’s old partner. Today’s buzz rumours about Alipay and VTB, possible JV. Anyway Alipay has already paved its path into the Russian market by utilizing local partners and Chinese tourist demands, and it’s only a matter of time and priorities to take it up a notch or not.

WeChat did not wait too long though. While it does not have a strong retail brand in Russia, or any employees and representatives, for that matter, it purely sought the way of collaborating with banks to push their payments to the same offline merchants, servicing Chinese tourists, almost a year after Alipay’s first efforts. However, the road was paved, so Russia’s hospitality and tourist industry welcomes WeChat entry as a payment system for their client. It is not known so far about any Tencent M&A or investment negotiation with any local players, even though Tencent owns shares in Russia’s number 2 IT company – Mail.Ru, owner of Russia’s largest social network VK.

Speaking of the devil, with Russian’s focus shifted from West to East, the local ecommerce and fintech scene has started to get inspired from the Asian experiences, rather than from the western market. For example, Sberbank, the largest Russian bank, included chat functionality to their mobile banking app; Tinkoff, a purely digital bank, has added Instagram-like stories, lifestyle services to their mobile banking app and announced lifestyle banking strategy; and VK, a social network, has launch VK Pay app, enriched with food delivery, tickets, taxi and other WeChat-like functions. Not to mention the traditional fintech leaders quickly adopting new ideals from the East.

One thing is certain now. No company in Russia is short of sight to Eastern wonders, no local fintech is blind to the lifestyle paradigm change, and the rest are the good luck, and some good product proposition, amen.

Expert’s opinion does not necessary reflect the official position of the company.

About Anna Kuzmina

Anna, Deputy CCO, is in charge of Yandex.Checkout’s international business development. Having worked for some of Russia’s largest ecommerce companies, including Mail.ru Group and Xsolla, she has a strong expertise in online payments for digital goods, retail, and gaming. Anna contributes to Russian and foreign ecommerce research, being particularly knowledgeable about the Russian-Chinese cross-border market. She is both a Chinese-speaking expert, as well as a hands-on manager who has been building bridges between the two ecommerce markets for over a decade.

About Yandex.Checkout & Yandex.Money

Yandex.Checkout is the leading service for accepting online payments in Russia, according to 2018 MARC survey. Yandex.Checkout allows merchants around the world to accept all online payment methods: credit cards, e-wallets, mobile billing through the Russian providers, and cash via 250,000 acceptance points all over the country and CIS. Currently, more than 90,000 online stores across the globe use Yandex.Checkout.

Yandex.Checkout was launched by Yandex.Money in 2013. Yandex.Money is the joint venture of search engine Yandex (NASDAQ: YNDX), and Sberbank. The service hosts about 35 million user accounts.