Concerns are rising as Chines tech giants are increasingly making inroads into the Korean market while local online firms are being discriminated in the nation due to the Chinese government’s strict regulations.
Chinese online giant Tencent, is set to provide a mobile wallet service, WeChat Pay, for South Korean consumers, by teaming up with KRPartners, South Korea’s payment service provider. Partnering with a credit card company Hana Card, it will even go offline with physical stores. It will expand its service from Coffin Gurunaru, a South Korean coffeehouse chain to Shilla Duty Free and Innisfree, a South Korean cosmetics brand.
Tencent’s WeChat Pay was created by integrating WeChat, the Chinese counterpart of a Korean messaging app Kakao Talk, with mobile payment service TenPay. With a large number of registered users, Wechat has made into the world’s top three mobile messengers along with Whatsapp of Facebook and Line of Naver.
WeChat Pay is a mobile payment system which enables users to take their bank or credit card to pay for items on their smartphone. Also, users can receive money through its transaction service and make in-store payments.
“A lot of Chinese tourists are expected to use WeChat Pay to make purchases” said the person familiar with the industry. “Success of WeChat Wallet is crucial to Tencent’s push into the Korean market.”
China’s e-commerce titan Alibaba, is gearing up for expansion in the Korean market. At a talk held on 19th last month, Jack Ma, Executive Chairman of the company hinted at launching KoreaPay (provisional name) in cooperation with a Korean firm. He said that “I am strongly interested in partnering with Korean firms. In the future, I would like to launch ‘KoreaPay’. So I am looking for a partner to team up with Alipay”. As such, Alibaba is planning to expand its partnership with Korean companies in shopping, simple payment and logistics, etc.
With 800 million registered users, Alibaba’s Alipay is taking more than half of the payment service market in China. It is available at about 500,000 shops and recorded 700 trillion won of annual transactions.
Armed with Alibba’s financial and technical capabilities and know-how, KoreaPay, Alipay’s Korean version, will control the Korea’s payment service market in a short period of time once it is introduced in the market. It will be difficult for Korean firms to counter the move considering lackluster growth of the financial technology (FinTech) market due to strict regulations in South Korea.
Experts say that it is a matter of time for Alipay to provide its service in the Korean market after building experiences and know-how through KoreaPay. Some concerns about that “Korea’s payment service market will be swept by Chinese firms.”
While Chinese firms are eating into the Korean market, it has become more difficult for Korean firms to make inroads into the Chinese market. The Chinese government has blocked popular foreign messenger apps including Korea’s Line (600 million) and Kakao Talk (200 million) citing danger of spreading information linked to terrorist activities. Line and Kakao Talk could be unavailable altogether in China as the Chinese government recently introduced the real-name verification system. Chinese will now need to verify their identity for social network services (SNS) and mobile messengers. It has a huge impact on Line and Kakao Talk where users sign up with their email address and phone number.
Against this backdrop, Naver and Daum Kakao Talk have excluded China from their global roadmap. Naver takes a step backward and plans to use indirect method to enter the market.
“Uncertainties loom large as the Chinese government is laying out policies to protect local businesses and control information. So, Korean firms will face challenges when expanding their businesses in China” said a person familiar with the mobile industry” “At the same time, they are suffering reverse discrimination as China’s giant FinTech firms such as Alibaba and Tencent, armed with great capital and technology, are pushing into the Korean market.”
