Tencent Puts Payment App on WeChat

Tencent Holdings Ltd is introducing a payment service to the company's popular instant messaging service WeChat. It's also the latest attempt for Tencent to commercialize the application and compete with e-commerce giant Alibaba Group Holding Ltd.

"We are convinced of the need to bring payment services to wireless platforms," said Martin Lau, president of Tencent. "Although some apps are free of charge for users, the large traffic these products bring in will enable us to sell advertisement slots, an alternative way for us to make a profit."

The Internet giant, based in Shenzhen, Guangdong Province, will introduce online and offline payment services to an upcoming version of WeChat, it said.

Although Tencent did not reveal the launch date of the new WeChat, a beta version is already available for some developers.

Analysts said Tencent, famous for social and gaming products, is eyeing the e-commerce sector for profit growth as advertising growth flattens. However the new area is a territory long dominated by Alibaba, the nation's largest Internet company by market capitalization.

Alipay, a third party payment subsidiary under Alibaba, is the biggest online payment platform by transaction volume.

Pony Ma, chief executive officer of Tencent, is betting on his company's mobility strength to challenge Alibaba. WeChat's offline payment feature may add pressure to Alipay, which is also trying out off-the-Web payment services.

Transaction volumes of the third-party payment sector exceeded 10 trillion yuan (US$1.6 trillion) last year in the country, said a report released by the Payment and Clearing Association of China in late June.

Online payment accounts for nearly 70 percent of the sum. The emerging mobile payment service generated a little more than 181 billion yuan in transaction volume, according to the association.

The rapid growth of the mobile Internet sector plus Tencent's large user population may help the company explore new businesses, including financial services, according to Yu Xiaohui, chief engineer of the China Academy of Telecommunication Research under the Ministry of Industry and Information Technology.

"Mobile Internet is set to become the most desired segment for Chinese Internet companies as the nation is growing to become the second-largest Internet market only after the United States," he added.

User numbers for WeChat saw a steady increase since its release in January 2011. The user population exceeded 300 million at the beginning of this year with users outside the Chinese mainland hitting 70 million, according to Lau.

In addition to Hong Kong, Macao and Taiwan, WeChat's major markets include India, Thailand, Malaysia and Mexico.

WeChat will have at least 400 million users by the end of this year, Bloomberg News reported, citing Alicia Yap, an analyst at Barclays Plc in Hong Kong. WeChat could produce annual revenue of as much as 2.16 billion yuan if the app provides gaming and other related services, said Yap.

Building an active developers' community will be one of the top priorities for Tencent's new businesses such as WeChat, said Lau, president of the company.

App developers of Tencent have received 3 billion yuan in revenues since the company launched an open-platform project in 2011 encouraging technology startups to develop new apps for the Internet giant.

Developers are likely to earn another 3 billion yuan before the end of this year, Lau estimated.