How Alibaba and Tencent Brought Mobile Payments to Chinese New Year - Barron's

Illustration by Elias Stein

Next Saturday, China’s Lunar New Year takes place. And throughout the week, billions of dollars will be exchanged between consumers’ smartphones.

Gifting money to friends and families in “red envelopes”—hongbao in Chinese—has long been a holiday tradition. In recent years, the practice has shifted online, thanks to burgeoning mobile payment platforms that fight fiercely to attract new users.

Tencent Holdings ’ messaging app, WeChat, first allowed consumers to send and receive virtual hongbaos through its payment service in 2014, quickly drawing millions of new users as it partnered with China’s most-watched TV event—CCTV’s Spring Festival Gala.

Alibaba Group’s Alipay soon followed, giving out millions of dollars in cash and coupons—directly or through partnering retail brands—in card-collecting games, low-carbon challenges, or augmented-reality scavenger hunt. The battle intensified as Tencent combined cash giveaways with fitness tracking and gold gifting.

By adopting a familiar practice rooted in Chinese tradition, virtual hongbaos helped users quickly grow comfortable with mobile payments. In 2019, 823 million people—more than half China’s population—sent hongbao’s through WeChat Pay during New Year’s week, while 450 million people, a third of China’s population, participated in Alipay’s “five blessings” game for a chance to get a piece of 500 million yuan in prizes. This year, the tech giants have again poured money into their campaigns. Seven years after introducing virtual hongbaos, the goal is not only to attract users, but keep them engaged.

Next Week

Monday 1/20

U.S. Stock and bond markets are closed in observance of Martin Luther King Jr. Day.

New Oriental Education & Technology Group reports quarterly results.

Tuesday 1/21

The World Economic Forum’s 50th annual meeting convenes in Davos, Switzerland. This year’s theme will be “Stakeholders for a Cohesive and Sustainable World.”

Capital One Financial , Halliburton , IBM , Netflix , UBS Group , United Airlines Holdings , and Zions Bancorp report earnings.

The Bank of Japan announces its monetary policy decision. The central bank is expected to keep short-term rates unchanged at negative 0.1%.

Wednesday 1/22

Abbott Laboratories , Amphenol , ASML Holding , Johnson & Johnson , Northern Trust ,Prologis, and Texas Instruments report quarterly results.

The National Association of Realtors reports existing home sales for December. Economists forecast a 1.5% rise, after declining 1.7% in November.

The Federal Housing Financing Agency releases its House Price Index for November. Consensus estimates are for a 0.3% gain in single-family home prices, after edging up 0.2% in October.

Thursday 1/23

American Airlines Group , Comcast , Discover Financial Services , Intel , Kimberly-Clark , Procter & Gamble , Southwest Airlines , and Union Pacific report earnings.

The European Central Bank announces its monetary-policy decision. ECB President Christine Lagarde, who replaced Mario Draghi last November, is widely expected to announce that interest rates will remain steady at negative 0.5%. Lagarde might also shed some light on the strategic policy review that the ECB is undertaking, the central bank’s first since 2003. The continued viability of negative interest rates and how the ECB should best address persistently low inflation, are topics of discussion.

The Federal Reserve Bank of Kansas City releases its Manufacturing Survey for January. Economists forecast a negative six reading, rebounding from December’s negative-eight figure. The survey had negative readings every month in the second half of 2019.

Friday 1/24

Air Products & Chemicals , American Express , Ericsson , NextEra Energy , and Synchrony Financial report quarterly results.

Many markets throughout Asia, including China and South Korea, are closed in observance of the lunar New Year, which falls on Saturday, Jan. 25.

IHS Markit reports its U.S. Composite Purchasing Managers’ Index for January. Expectations are for a 53.8 reading, up from December’s 52.7 figure.

Write to Evie Liu at evie.liu@barrons.com

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How Alibaba and Tencent Brought Mobile Payments to Chinese New Year - Barron's
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