Chinese tourists are notorious for spending money. In Japan, locals even have a special word – bakugai or ‘explosive buying’ – to describe the bulk-buying sprees of Chinese travelers. From cosmetics to luxury handbags, shopping is a big part of tourism for outbound Chinese travelers.
For Chinese tech companies, these globe-trotting consumers serve as an entry point into overseas markets. Mobile payment systems Alipay and WeChat Pay have been able to partner with international brands, retailers, and airports eager to capitalize on Chinese tourists – despite having low penetration outside of China. Even QR codes are finding a home in certain venues abroad, driven by the needs and habits of Chinese customers.
“For both retail and hospitality, in terms of traffic, Chinese tourists are absolutely huge,” Alexis Bonhomme, co-founder of digital marketing firm CuriosityChina, tells Tech in Asia. “So the concept big retailers have in mind is the ‘global Chinese shopper.’”
“She lives in Shanghai – she purchases in Paris and London,” he explains.
China leads the world in outbound tourism.
According to the World Tourism Organization, China led the world in outbound tourism for the fifth year in a row in 2016, hitting a new record of 135 million travelers that spent a total of US$261 billion.
“China’s increasing number of outbound tourists drives the internationalization of big Chinese tech companies,” says Eda Erbeyli, project manager at Daxue Consulting. From Baidu’s map service to Chinese social messaging app WeChat, Chinese tech giants are leveraging the country’s outbound travelers to make their businesses more global, she adds.
The power of money
In China, anything from splitting a bill to shopping for groceries can be done through your smartphone. Alipay and WeChat Pay are the country’s two largest mobile payment solutions, together controlling about 90 percent of the domestic industry, according to research firm Analysys.
However, the two have yet to make a dent in the global payments market. That’s where Chinese tourists come in. They’re the incentive for overseas companies – especially those in places that attract travelers from China – to partner with Alipay and WeChat Pay.
Alipay and WeChat Pay have yet to make a dent in the global payments market.
Just this week, for instance, Alipay signed a deal with payment processor First Data. The partnership opens its users to 4 million merchants in the US. In Europe, Alipay is working with Ingenico, an electronic payments platform that services thousands of businesses, including Carrefour and Estee Lauder.
By the end of the first quarter this year, Alipay says it had a network of close to 110,000 brick-and-mortar retailers across 20 countries and regions – excluding mainland China.
“We already have partnerships with some of Europe’s best-known retailers, which have proven popular with traveling Chinese consumers,” said Douglas Feagin, senior vice president of Ant Financial and president of Alipay International, in a press release last December.
“Our users’ lifestyles are increasingly global, so it’s vital we are able to work with the leading payment providers across the world,” he added.
WeChat Pay has pursued a similar strategy. It’s partnering with mobile payment platforms, banks, and data providers all over the world, including the US, Japan, and South Korea, so Chinese tourists can pay with the digital wallet when shopping abroad.
Chinese tourists accounted for almost a third of Thailand’s foreign tourism revenue in 2016.
It’s been especially successful in Thailand, where Chinese tourists accounted for almost a third of the country’s foreign tourism revenue in 2016. According to Tencent, WeChat Pay saw its number of transactions in Thailand grow 600 percent year-on-year during this year’s first quarter, which it attributed to the rising number of Chinese travelers.
Thanks to tourists from the mainland, Hong Kong is also a high-growth market for WeChat Pay. Over Labor Day weekend, the highest number of cross-border payments on WeChat came from Hong Kong, followed by South Korea, Thailand, and Japan.
That’s key because WeChat Pay hasn’t seen widespread adoption by locals in Hong Kong. Part of the problem has to do with a lack of offline use cases in Hong Kong. But as Tencent signs more exclusive partnerships with local merchants this year, that might soon be resolved.
“There aren’t that many offline use cases [in Hong Kong] yet – this is a large pain point,” Pony Ma, chairman of Tencent, explained to media during the National People’s Congress in March. “It’s not like in China where we have a lot of shops promoting [WeChat Pay].”
For now, WeChat is happy to see Chinese tourists increasing its volume of payments in Hong Kong. In addition to offline expansion, WeChat Pay will also have to become more credit card-friendly before it appeals to users outside of mainland China.
To be sure, the user base of Alipay and WeChat Pay is still primarily Chinese. Though domestic tourists have opened doors for overseas partnerships, international users remain out of reach.
But Alipay and WeChat Pay aren’t in a rush. In an interview with Bloomberg last August, Rita Liu, head of Alipay Europe, Middle East, and Africa, put it bluntly: “We’re actively looking for partners across Europe – merchants who want to cater to Chinese tourists or technical providers on the payments side. But we have no plans to target European customers.”
Even the palace of Versailles has its own WeChat account.
Still, there’s no doubt that tourism has helped both tech giants expand their international presence – without forcing them to go head-to-head with global competitors.
Outside of payments, international companies are also increasingly interested in targeting Chinese tourists through WeChat. Even the palace of Versailles has its own WeChat account. It launched in 2015 with the express purpose of engaging with and informing Chinese tourists.
“Because of all the Chinese coming to their business overseas, [some clients] are deciding to dig deeper into China,” Aaron Chang, CEO of WeChat marketing firm Jing Digital, tells Tech in Asia. In particular, brands see value in reaching out to customers while they’re abroad, staying in contact via WeChat, and re-connecting once they’re back in China, he says.
For instance, New World Hotels, one of CuriosityChina’s clients, uses a WeChat brand account to connect with customers while they’re abroad – they can even check-in via QR code. Then it follows up with different offers after they come back to China. A customer who lives in Shanghai won’t want to stay at New World locations in their home city, says Bonhomme, but they might be interested in its restaurants. WeChat’s location-based services allow for that kind of segmentation.
These cross-border channels could come in handy as both Ant Financial and Tencent invest aggressively in international markets. In India, Ant Financial has a stake in Paytm, an Indian payments company, whereas Tencent has chosen to back ecommerce company Flipkart and healthcare startup Practo.
Last month, Ant Financial merged with HelloPay Group, which provides the payment solution for Lazada, one of the largest online marketplaces in southeast Asia and one of Alibaba’s portfolio companies. In contrast, Tencent has made Thailand its stronghold.
As the two companies continue to battle it out in payments, riding on the wave of outbound Chinese tourists will be an important strategy for overseas expansion.
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