The barriers to using Chinese mobile payment apps abroad are coming down as the country’s two biggest tech giants revive an effort to let users from other countries pay like locals. In China, mobile payment apps have become the dominant form of consumer payments and triggered a boom in ecommerce. WeChat, owned by Tencent Holdings (0700. H.K.), and Alipay, operated by Alibaba Group affiliate Ant Group, are the most popular, covering 1.4 billion mainland Chinese citizens.
But until now, foreigners could only use the services by setting up a Chinese bank account or linking their overseas cards to the apps. That was a hassle, and it kept many potential buyers from using the apps when visiting China, as they would incur costs such as currency conversion fees and transaction charges by their banks.
Tencent and Ant partnered with Visa Inc (V.N.) and Mastercard in 2019 to enable overseas customers to use their cards on the platforms. But the initiatives took a back seat when the COVID-19 pandemic temporarily closed China’s borders. But now that the country is reopening, they are reviving them.
The companies are also working to bring their services to the United States, hoping to capitalize on a large population of Chinese nationals who live and work there. Several prominent merchants, including some casinos and restaurants in Las Vegas, are already accepting Alipay. But it is unlikely that the effort will be successful in the long term, as the U.S. government is wary of giving Chinese technology giants access to Americans’ private data.
For now, the focus is on China’s thriving tourist market. Using a foreign credit card in China typically involves a currency exchange fee and transaction fees for both the domestic Chinese and the international card, all of which can add up. But the availability of Tencent and Ant’s services could allow visitors to avoid some of those fees, mainly as they can be used to buy items directly on ecommerce sites, such as cab rides or hotel rooms.
But a significant hurdle remains: China’s strict anti-money laundering rules require anyone accepting credit card payments to have a license. That is one reason overseas players have been challenged to establish a foothold in the country.
In a separate development, a news site Caixin Global reported that Chinese card processors, including those for Alipay and WeChat Pay, were circumventing payment card industry standards on credit card cash advances. The practice, known as “cash-out services,” allows consumers and businesses to tap their credit cards for cash advances at much lower costs than they would typically face. But the practice is controversial and blamed for contributing to soaring China’s credit card debt.