WeChat's app war - why other apps cannot bank on third party wallets

January 24, 2019

 

Hot off the press - China's super-app WeChat, has just struck a blow to three competing social apps. In the case of Liaotianbao, the announcement of the blocking of their platform by WeChat came just before their launch in Beijing. This is perhaps becoming a strategy worth taking note of with WeChat, who in May of last year changed their rules around third party services, under the guise of “users’ privacy and content compliance.” This created an uproar even among Chinese media outlets and others online. Bytedance's CEO, Zhang Yiming, went so far as to accuse Tencent of looking for excuses to block competing apps. 

 

WeChat has a dominant position in the Super-app space, with over one billion monthly-active-users. That being said, there is always space for others, since nobody really owns a phone with just a single app on it. The result is that dominant players like WeChat will always try to keep others out, fair or foul. 

 

There is another angle to their controversy that I would like to focus on though, and that's the in-app payment space. Smaller apps that want to engage their users financially often times will embed the wallet or payment solution of a large incumbent player. WeChat or AliPay being the perfect example of this in China. However, what happens when a smaller app wants to do something truly novel with payments, and this gets blocked by the big payment wallets, or worse, just copied? What if an app already has a large community and they are preparing to engage their ecosystem financially. If an incumbent wallet blocks an app to stop it from competing, what is their next best option?

 

This is the very clear and present danger for apps enabling payments into their ecosystems today, and a solution is required. There is no choice really, an app with a significant community should be moving to have their own wallet solution. It is far from a vain, good-to-have, but is rather the kindle that ignites an entirely new engagement axis between the app and their community, regardless of where they live, what currency they use, or who they want to spend their money with. For too long, wallets have been a bad word, and it is actions like WeChat's latest that help to perpetuate that belief. 2019, as predicted, will be the year of the wallet (as well as the year of the pig for friends celebrating Chinese New Year).

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