Mobile payment in China is dominated by two players, Alipay and Tenpay. They compete in providing remote payment services to hundreds of millions of users. Alipay leads the market with 63% share while pursuing strategies like partnering with Kuaidi to form a closed-loop online-to-offline system. Tenpay works with Didi and pursues horizontal integration through its parent company Tencent. Both players experience rapid growth, with Alipay transaction volume growing over 200% and Tenpay over 210% sequentially. While the market is currently oligopolistic, new entrants like search giant Baidu and mobile OS provider MIUI see potential and may disrupt the current dynamic.

1. Mobile Payment in China:
The competition between Alipay andTenpay
Group 2: Angeline, Carol, Chris, Laura, Victoria

2. Outline
✤ Current Situation!
✤ Analysis with IO model!
✤ Future
1

3. Current situation＞Background
✤ Driving forces of mobile phone usage in China:!
(1) The prevalence of 3G and WIFI.!
(2) The price of smartphone goes down.!
(3) A variety of APPs, especially IM Apps.
2

4. Current situation＞Background
The scale of mobile phone users in China
0
150
300
450
600
2007 2008 2009 2010 2011 2012 2013
✤ By the end of 2013, the number of Chinese mobile phone users
reached to 500 million (CNNIC, 2013).
3
50.4
117.6
233.44
302.74
355.58
419.97
500.06
million

5. Current situation＞Background
✤ Among 500 million mobile phone users, 125 million are using
mobile phone to pay (CNNIC, 2013).
The user scale of mobile payment
0
32.5
65
97.5
130
2012 2013
55.31
125.48
million
4

6. Current situation＞Background
Based on the annual report from
Alipay (2013), people who using
mobile payment are:
Addicted to
online
shopping
S
I
N
G
L
EMale
Young
DARE TO TRY
New products
5

7. Current situation＞Definition
✤ Mobile payment is a form of payment where a user uses
mobile device to complete fund transfer from the payer
to the payee for the purpose of payment by way of
accessing communication networks or using short-
range communication technologies (Deloitte, 2013).
6

8. Current situation＞Characteristic
✤ Safe!
✤ Quick!
✤ Big data!
✤ And……Cool！
7

9. Current situation＞Regulation
✤ In 2010, People’s Bank of China
(PBC) formulated Administrative
Measures for the Payment Services
Provided by Non-financial
Institutions.《⾮非⾦金融机构⽀支付服务管理办法》!
✤ To date, 250 institutions have
received Third-Party Payment
(TPP) licenses.
8

10. Current situation＞Product Differentiation
Proximity payment Imagpay Remote payment
Examples:Examples:Examples:China Mobile
China Union
China Telecom
lakala
qiandai
Vbill
Yeahka
iboxpay
Alipay
Tenpay
Yeepay
Unionpay
99 Bill
9

11. Current situation＞Market Structure
Perfect
competition
Monopolistic
competition
Oligopoly Duopoly Monopoly
Proximity payment
Remote payment
Imagpay
10

12. Current situation＞Concentrated
CR4=93%
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Source: iresearch.com
Alipay'
lakala'
Umpay'
Tenpay'
China'Mobile'
others'
72.6%
10.6%
5.1%
3.9%

13. Current situation＞Application Scenarios
27%
36%
37%
9%
91%
31%
23%
46%
8%
84%
8%
C2C
Travel booking
Game
B2C
Tenpay
Others
Alipay
2013Q2 !
第三⽅方⽀支付平台点击访问市场份额
Source: Hitwise
12

14. It is a competition between
Alipay andTenpay
13

15. Analysis with IO Model
✤ Structure!
✤ Conduct!
✤ Performance
14

16. Structure＞Numbers of buyers and sellers
Others!
8%
Tenpay!
29%
Alipay!
63%
Source: Hitwise !
2013Q2第三⽅方⽀支付平台点击访问市场份额
200 million 300 million
15

17. Structure＞Business model
✤ Personal transaction fee!
Transfer, paying traffic ticket, and International payment, etc.!
✤ Interests!
TPP’s money is hosted in bank.!
✤ API fee!
Inserted TPP as a payment way in its own website.
16

18. Structure＞Product differentiation
Top-up channels Payment means
Online banking with
debit/credit card
Phone credits
Prepaid cards
Payment wallet
Source: Remote Payment business model (Deloitte, 2013)
✤ There is no difference in terms of remote payment.
17

19. Structure＞Product differentiation
✤ Only Alipay has proximity
payment:!
(1) 2D and QR code payment;!
(2) Sound wave payment.
18

20. Structure＞Entry barriers
✤ Capital requirement!
The minimum registered capital is 100 million for serving China.!
✤ Scale economics of mobile payment!
✤ Restricted government policy
19

21. Structure＞Vertical Integration
✤ Third-Party Provider (TPP) platform, such as Alipay and
Tenpay, has cooperated with telecom operators, browser
providers, financial institutions, and merchants.
Telecom!
operator
Financial!
institution
TPP!
platform
20

22. Analysis with IO Model＞Conduct
21
1. O2O!
2. Case study!
3. Horizontal Integration

23. Conduct＞Online to Offline
✤ The way to maximize the online payment function is to
link online to offline (O2O), and to form a O2O closed-
loop.!
✤ O2O is a business model which means attracting users
online and directing them to physical stores in the offline
realm.
⼤大众点评CEO张涛说：!
「我认为O2O的核⼼心就是闭环，如果想做⼤大，必须完成闭环。」
22

24. Conduct＞How to form O2O closed-loop
✤ For Alipay!
Advantages: Has 300 million users;!
Disadvantages: They are using computers to pay;!
Strategy: Shifting their users from computer to mobile phone.
23

25. Conduct＞How to form O2O closed-loop
✤ For Tenpay!
Advantage: WeChat has 600 million users; !
Disadvantage: Not forming a habit of using WeChat to pay.!
Strategy: Attracting WeChat users to use WeChat payment
(supported by Tenpay).
24

26. Conduct＞Case study
✤ Alipay+kuaidi v.s. Tenpay+Didi dache
25

27. Conduct＞Case study＞ Competition
26

28. Conduct＞Case study＞Transaction process
27
WeChat
bundle with debit/credit card
Didi Dache
Payment
Driver’s Didi account
Transfer to debit card
Kuaidi cache
Bundle with AliPay
Payment
Driver’s AliPay account
Transfer to debit card

29. Conduct＞Case study＞Outcomes
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Daily Average
Orders
1.83 million 1.28 million
Daily Peak 2.62 million 1.62 million
Daily Peak via !
Mobile Payment
2 million 0.6 million
Subsidies!
（返现补贴）
4 billion RMB Above 1 billion RMB

30. Conduct＞Horizontal Integration
29
1. Tencent and Public Comment !
2. Alibaba and AutoNavi

31. Conduct＞Horizontal Integration
✤ Tencent has purchased
approximately 20% of
Public Comment’s (⼤大众
点评) stocks.!
✤ Public Comment is the
largest online group
purchase platform in
China.
30

32. Conduct＞Horizontal Integration
✤ The reason for Tencent to purchase:!
(1) Cooperate with a stronger platform; !
(2) Acquire more users and trackable data.!
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300 million 1.7 billion 30 million 1 billion

33. Conduct＞Horizontal Integration
32
✤ Recently, Alibaba
bought AutoNavi
(⾼高德地图) in a deal
at $1.58 billion.

34. Conduct＞Horizontal Integration
✤ The reason for Alibaba to purchase:!
33
Maps can provide location-based
service to smartphone users.

35. Analysis with IO Model＞Performance
34
1. Transaction size!
2. Sequential growth rate

36. 0
75
150
225
300
Alipay Tenpay
transaction size
billion
Source: 易观智库《2013年第三季度第三⽅方⽀支付市场季度监测》
Analysis with IO Model＞Performance
215.2 billion
80.9 billion
Sequential growth!
rate (环⽐比增长率) of
Alipay：208%
Sequential growth!
rate (环⽐比增长率) of
Tenpay：211.8%
35

37. Future＞Potential entrant
MIUI (⽶米柚), a personalized Android system; !
Abundant push channels (YY, UC, and Vancl);!
Establish closed-loop: only lack of payment.
36

38. Future＞Existing threat
37
Owning China's most popular search engine;!
Owning Baidu map;!
Bought majority stake in Nuomi .

39. Future＞ Establishing a regulatory organization
✤ Considering trusted issues, a mobile payment industry
promotion organization should be established (Deloitte,
2013).!
✤ To promote win-win cooperation among the participants.
38

40. Summary
✤ Mobile payment is still in its infancy, but it is the trend.!
✤ Product differentiation: Proximity payment, Imagpay, and Remote
payment.!
✤ In terms of the application scenarios, it is a competition between Alipay
ad Tenpay.!
✤ Market structure: oligopoly and concentrated.!
✤ After taxi-ordering competition, Alipay and Tenpay conduct horizontal
integration to form an O2O closed-loop.!
✤ More players will enter the mobile payment market, and regulation is
necessary. 39

41. Thank you.
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