The real fight for Chinese mobile payments isn’t taking place in China

On their way again.
On their way again.
Image: AP Photo/Francois Mor
We may earn a commission from links on this page.

On Thursday (July 27), California-based payment giant PayPal announced that it’s partnering with Chinese search giant Baidu—the latest sign of how the fight has heated up for a piece of the mobile spending of the more than 130 million Chinese travelers who head abroad each year, as well as those who shop for overseas goods from home.

Baidu says its focused on the latter group with this move, and that the partnership will eventually allow Chinese shoppers to use their Baidu digital wallets to make payments at the 17 million merchants that are part of PayPal’s global network. Chinese shoppers should be able to use their Baidu wallets at some PayPal merchants before the end of 2017, according to a Baidu spokeswomen, with the service expanding to all merchants later. While paying through the Baidu app, users will immediately see the exchange rate they’re getting and what they spending in yuan, she added.

Baidu Wallet, which has around 100 million users, is far from a major player in mobile payments in China, the number one market for such transactions. Alipay, from e-commerce giant Alibaba, and WeChat Pay, from social media firm Tencent, dominate. Together they have some 90% of the 38 trillion yuan ($5.7 trillion) in mobile payment transactions China saw in 2016. Baidu accounted for 0.4 percent (paywall) of third-party mobile payments in 2016.

In China, PayPal has a separate tie-up with another payment platform, UnionPay, also aimed at helping Chinese consumers pay for overseas goods from online vendors.

However, given the market share of Alipay and WeChat Pay, the opportunities for competing with the bigger players in China may really be overseas. According to management consultancy Oliver Wyman, Chinese travelers spend an average of $3,000 per overseas trip, with the make-up shifting away from shopping and towards recreational spending.

This year has seen a slew of partnerships between Chinese and US online payment platforms, to allow Chinese users to use their digital wallets more seamlessly. Earlier in July, San Francisco-based startup Stripe announced that it would allow merchants on its platform globally to accept payments from Chinese customers who use Alipay and WeChat Pay. In May, Atlanta-based payments processor First Data said that it would allow more than 4 million US merchants to accept payments made by Alipay. In February, a Chinese-funded Silicon Valley payments startup, Citcon, announced a similar partnership with Alipay and WeChat Pay.

Nor is this Baidu’s first foray overseas for its mobile wallet. In April 2016, Baidu announced a deal with 400 vendors in cities in Thailand to allow its users to pay in yuan.

Will this move help Baidu compete with Alipay and WeChat Pay? Some argue that it’s unlikely. PayPal is an online digital payment platform that doesn’t have a big share in the offline market, such as restaurants and shops, where tourists are most likely to spend money, says Wang Hanyang, a fintech analyst with 86research, a Shanghai-based research company. And for those who buy foreign goods through domestic sites, they are likely to already have credit cards that support at least two currencies, giving them less reason to opt for Baidu Wallet, Wang says.