WECHAT: Continuing to break boundaries

Undoubtedly, WeChat has been one of the great tech success stories of the last twenty years — but there is far more to the Tencent-owned app than meets the eye. Tencent’s Tim Leung tells Lafferty News how its social element is “just one dimension”.

Although Tencent was founded in 1998, WeChat didn’t begin life until 2011, when it emerged from the internet company’s internal research unit. Since then, it has experienced a remarkable expansion in its pool of users (in fact, it’s not a pool — it’s an ocean of over one billion active monthly users, worldwide). Let’s put that into context: the entire population of China is around 1.4 billion.

Lafferty News spoke with the deputy general manager of Tencent FiT, on the sidelines of our recent International Retail Banking-Fintech Forum in Shenzhen in mid-May and although Mr Leung was keen to praise the social aspect of WeChat, he reiterated his firm’s stance that there are plenty of other strands to WeChat which have made it popular, successful and reliable.

SOCIAL ELEMENT — ONE PART

“I think the social element can make certain aspects easier, but it’s just one dimension”, he said.

“I don’t think it’s a building block, so to speak, for finance. Security is, user experience also is. So, lots of financial services become micro-services. We can have a social aspect, but by itself, I don’t think that will change finance”, Mr Leung added.

It’s an interesting observation. It hasn’t ever been clear whether Tencent directly makes huge money from WeChat (if anything at all), but what’s more evident is that the internet company wouldn’t be half as influential without it.

WeChat has become an omnipotent presence, pinging on people’s phones every few minutes or seconds with messages from friends, information updates or an announcement that a red envelope has arrived. It was an internal innovation, but it was also part of the rise of messaging apps through the 2000s, and so its success should be looked at as part of that over-arching story. Essentially, WeChat has become an even better, well-rounded more viral version of Whatsapp.

Indeed, it has been the introduction of red envelopes which has really catapulted WeChat to another level. Gifting red envelopes has long been a tradition in China (as it is with gifting gold — which is why Tencent rolled out its Microgold service back in February).

Since 2014, WeChat has let users send digital red envelopes (or ‘lucky money’) to selected contacts/friends containing a predetermined amount of money which, when opened, is put straight into your WeChat wallet for spending however you like (or for sending on to someone else in turn). It’s got a fun factor to it as well: if you send it to more than one person, you can choose how the amount is divided: the first person to open it can choose to snaffle the lot or the money can be split evenly, for example.

A lot of commentators have spoken about how payments can’t drive revenue alone (an argument as to why digital wallets will never bring in great profit) — plenty of supporting elements are needed to do that, but the social element of WeChat has been pivotal to how it has managed to continue engaging its users. Mr Leung is right in saying that the social element is just one part — but it is an influential one.

OMINPOTENT WECHAT

Tech use is an everyday fixture across most of the world, but on a recent trip to Shenzhen, Lafferty saw firsthand how much people navigate their online and offline life through WeChat. It is a hub that helps make life easier for people, and it makes most tasks seamless.

During his on-stage presentation, Mr Leung also explained that although Tencent has managed to transform WeChat into an uber-popular payment tool for its users, it doesn’t plan on entering the world of banking — at least not just yet. (Tencent does have its own bank, WeBank, one of the first private banks licensed in China, though it operates largely within the Tencent ecosystem.) “Banking, we’re not so good on. Customer internet experience is where we are good at”, he said.

His talk made it clear that Tencent is focused on running value-added services across the board. Instead of getting sucked into providing financial services, it seems content to let the big banks serve this customer need while it meets other, more curious, demands. But that’s not to say WeBank will not become a force to be reckoned with: back in March it teamed up with Bank of East Asia to offer microcredit and personal loans, which could become a popular and more widely available service in time.

On a tour of Tencent Buildings (the company’s HQ), a guide demonstrated to Lafferty News how the technology could be used to purchase items from a vending machine. Following a quick scan of a QR Code sitting just below a miniature soft toy version of the QQ Penguin, one popped out a mere nanoseconds later. If you live in China, it’s easy to see how you might take this innovative tool for granted — but from a western perspective, the novelty element was alive and well.

“I use it for everything: for booking flights, renting a Mobike [a bicycle rental service founded by a journalist, no less] and paying for fast-food delivery to my address”, one veteran Chinese banker excitedly told Lafferty News as they scrolled and swiped through the app in a hurried tutorial.

BANKS CAN LEARN FROM WECHAT AND TENCENT

Many have sought to explain the popularity of Tencent, WeChat, TenPay etc. Tencent’s culture of innovation, willingness to create meaningful links between the China of yesterday and tomorrow, eagerness to collaborate and desire to put the customer at the heart of everything it does have all been equally influential factors behind its massive growth.

Financial institutions have a lot to learn about how Tencent has been able to infiltrate its customers’ lives and make them feel like they would be lost without its apps.

To finish with a sobering point from a banking perspective shared at Lafferty’s recent conference in China: Li Lin, chief expert of the China Banking Association’s fintech lab stated that small- and medium-sized banks are facing a crisis on the back of WeChat becoming the “capital centre”. Over one-third of these bank customers are cutting down on the time they spend dealing with the banks.

A scary reality for those banks…but an example of the Tencent influence in full effect?

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