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Tencent surrenders in mobile payments battle with Alibaba

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By Jessica Goodfellow, Media Reporter

May 2, 2016 | 2 min read

Tencent, which owns popular messaging app WeChat, has backed down in the race to become China’s largest micro payments provider in its ongoing struggle to take the crown from online retail giant Alibaba.

The company’s payment service, WeChat Pay, began charging users in March for transferring funds between the app and traditional bank accounts in order to bring operating losses from the service “under control”, Tencent’s chairman reported.

Formerly the company subsidised the bank transaction fees associated with the transfers rather than passing them on to users, resulting in the social networking group spending Rmb300m (£31.5m) in fees in January alone.

In its fourth quarter, other revenue expenses increased by 153 per cent, which the company said was “mainly driven” by bank transaction fees from WeChat Pay.

Subsidising the fees helped WeChat attract millions of users and boosted transaction volume, but now the shift of fees onto users gives its competitor Alipay - the payment service run by Alibaba’s financial affiliate Ant Financial - a competitive advantage.

The latter has since dominated the online payments market, securing over £3bn in equity funding in the last few weeks, in what it said was the largest private placement by an internet company globally.

The online retail giant posted a 32 per cent growth year-on-year in revenue for its Q4 results, bolstered by a significant rise in mobile revenues. In terms of its international business, it said the strategy is focused on cross-border commerce that allows international brands and retailers to sell online to Chinese consumers.

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