NEWS WRAP: Alibaba marketplaces start accepting WeChat pay

China’s leading e-commerce marketplaces had resisted using the Tencent-backed payment service for years in favor of services from its affiliate Alipay

By Teri Yu

E-commerce giant Alibaba Group Holding Ltd. (BABA.US; 9988.HK) said on Wednesday that its Taobao and Tmall online marketplaces will begin accepting payments from people using Tencent’s (0700.HK) WeChat payment system starting September 12.

All merchants on the Taobao and Tmall can now opt to add WeChat’s popular payment service to their storefronts, Alibaba said. That service will complement Alipay, the main asset of Alibaba-backed Ant Financial, which has always been the primary payment option on Alibaba’s platforms.

The move may be partly a result of China’s recent regulatory efforts encouraging tech companies to break down barriers to end their practice of maintaining isolated ecosystems. Taobao advertisements and links have been allowed since last year on WeChat, China’s ubiquitous instant messaging and social media app. That allows users to directly place Taobao orders from the WeChat platform, signaling a new spirit of cooperation between China’s two biggest internet companies.

“We have always been open to collaborations and have actively explored interoperability and partnerships with our peers,” Alibaba said in its brief statement given to Bamboo Works and other media.

The addition of WeChat pay is likely to help Taobao and Tmall improve their user experience and tap new users, especially in lower-tier cities, which could bring in new business as Chinese consumers grow increasingly cautious. Alibaba’s fast-rising rival PDD Holding (PDD.US) has been reaping benefits from WeChat’s network of 1 billion users to offer group buying discount items with strong appeal to price-sensitive consumers in China’s smaller cities.

Thus, the acceptance of WeChat pay could help to level the playing field for Alibaba’s marketplaces against PDD and other e-commerce players that accept the Tencent-backed payment system.

A research report issued by Goldman Sachs on Thursday predicted the integration will eventually open up further partnerships, such as the creation of Taobao and Tmall mini-programs that work within the WeChat ecosystem. Such mini-programs would enable in-app transactions for the two Alibaba marketplaces within WeChat.

On the same day of Alibaba’s announcement, Alipay separately said it has launched mini programs in its own ecosystem for Meituan’s (3690.HK) popular food delivery and hotel booking services. Previously, Alipay only offered such food delivery services from Alibaba’s Ele.me service.

The elevated collaboration also coincided with an announcement last week from China’s State Administration for Market Regulation that Alibaba completed three years of antitrust rectification, taking it to “a new starting point” in its development.

It remains to be seen what kind of boost the latest partnership will bring to Taobao and Tmall. The move comes as Alibaba has recently emphasised that it is adopting a “user first strategy,” which has helped to stabilize market share for its core e-commerce business.

In its June quarter, the company recorded high single-digit online gross merchandise volume (GMV) growth and double-digit order growth year-on-year, showing its efforts to jumpstart its core business may be starting to bear fruit.

The company also announced several changes to support its online merchants and enhance its users’ experience. In July, it waived the annual software service fee it charged Tmall merchants, and it also modified its refund policy to give merchants with good track records more autonomy in handling refund requests.

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