Chinese video-sharing giants rush into the payment field

ByteDance has applied for the registration of the "Doupay" trademark, which is classified under the international classification of scientific instruments and website services, and the trademark status is "trademark application pending", according to Cailian Press (WeChat ID: cailianpress), a Chinese online business media start-up.

In September, ByteDance gained an online payment license by acquiring a Wuhan-based company, coupled with four financial licenses already in hand, its intention in the payment and financial business are obvious.

With the boom in the e-commerce and live streaming field, the giants are seeking their own closed-loop e-commerce through the integration of e-commerce, payment, commodities and other aspects. Among them, the payment has become an indispensable demand. Analysts all believe that in addition to the compliance considerations of carrying out payment business, Internet giants are increasingly pursuing the comprehensive capability output of "payment + technology".

 

Compliance is a major consideration in the layout of payment field

 

According to commercial information, ByteDance has applied for the trademark "Doupay" on November 18, 2020. Publicly available information shows that it has applied for the trademark "Doupay" several times before, but the applications have been unsuccessful and are in a state of rejection. In addition, the goods/services included in the application also contain "downloadable computer programs" and "downloadable mobile applications".

So far, ByteDance has four financial licenses, including the acquisition of financial licenses and trademark registration, which aims to supplement the existing major payment options, and to ultimately enhance user experience on its multiple platforms in China.

Rival Kuaishou has also been working on its payment business. Recently, the media reported that Kuaishou has acquired online payment firm Easylink Payment Co. Ltd, also known as Payeco. After the deal, Kuaishou will control more than 50% in the Foshan, Guangdong-based company, which owns a slew of online payment licenses, becoming the largest controlling shareholder of Payeco. According to the information on the official website of Payeco, it obtained the "payment license" in 2011, which allows it to engage in smartphone payment, Internet payment, prepaid card issuance and acceptance business.

In addition, other Internet companies like JD Digital and Ctrip are also "snapping up" payment licenses. Insiders believe that the main reason is undoubtedly related to compliance requirements.

"Since 2010, the central bank has been strengthening license control, and third-party payment licenses have become a necessary condition for payment licenses. However, since 2016, the central bank has not issued any new payment licenses in principle, and the total number of payment licenses owned by non-bank financial institutions is only 237 as of June 2020.

At the same time, regulations have recently been strengthening the requirements for payment institutions and financial institutions to operate under a license. "Engaging in financial services must be regulated and must hold a license," said Fan Yifei, vice-governor of the People's Bank of China at the 9th China Payments and Clearing Forum.

 

E-commerce dream is difficult to continue without the payment

 

In addition to compliance considerations, Wang Pengbo, a senior analyst in the financial industry, told Cailian Press that the value of obtaining a payment license for enterprises is mainly for their e-commerce business: firstly, it can lower the corresponding payment channel service fees and earn the corresponding reserve fund interest; secondly, it can obtain the underlying payment data, which facilitates enterprises to build a more detailed image of consumers and merchants for subsequent refined operation and business development. This is a great value for the e-commerce business of these Internet companies. 

The data show that short video e-commerce and live streaming e-commerce has reached a certain size. During Double 11, the overall payment turnover of ByteDance broke 18.7 billion, of which the one-day turnover on November 11 broke 2 billion.

In the meantime, it is considering further adjustments to its e-commerce business, which will be further integrated with the first-tier e-commerce department established in June. In early June, ByteDance set up a business department to coordinate the e-commerce business operations of Douyin, Toutiao, Xigua Video and other platforms.

As for Kuaishou, its prospectus shows that its operating income rose from 8.3 billion yuan in 2017 to 39.1 billion yuan in 2019, and the volume of e-commerce transactions reached 109.6 billion yuan in the first half of 2020. However, it is worth noting that in its prospectus, it combined e-commerce, online games, value-added services into "other income", and other income revenue in the first half of 2020 was about 810 million yuan, accounting for only 3.2% of the total revenue. That is to say, Kuaishou's income was only less than 810 million yuan among its hundreds of billions of transactions.

On the one hand, it can improve the compliance of its own business, which is good for the subsequent e-commerce finance and other businesses, and on the other hand, it can connect upstream and downstream businesses to form more synergy, said Su Xiaorui.

According to the media Tech Planet (WeChat ID: tech618), a product called "Fangxinhua" has been launched in the Douyin App, which is positioned as a platform for providing loan service technology. And it was still in the testing stage. 

Meanwhile, from October 2020, Douyin banned links to third-party websites on its live-streaming channels in a move that will prevent merchants from directing traffic to popular e-commerce websites like Alibaba's Taobao and JD.com. ByteDance is forming its own closed-loop e-commerce business through the deal.

In order to form a closed-loop e-commerce, payment, as the underlying support for the transaction flow of financial services, plays an important role in the financial ecosystem," said Su Xiaorui, "Taking payment as a node can connect both C-party users and B-party merchants, and also build an open platform to aggregate all kinds of resources, so that payment can be combined with various retail scenarios and give full play to the flow advantages of Internet giants."

 

Who will be the next payment giant?

 

Douyin has already been regarded as a rival in the social networking field like WeChat. As of August 2020, the daily active users of Douyin have exceeded 600 million, according to Kelly Zhang Nan, the head of Douyin. With a very large base of sticky users and active payment business layout, is it possible that its payment business will become the third strength in addition to WeChat and Alipay?

"I personally think it will be difficult in the short term," Wang Pengbo told Cailian Press, adding that consumers' usage habits have basically stabilized, and without great discounts, it may be difficult for most consumers to change their habits of using payment products in a short period of time.

In the current payment landscape, WeChat and Alipay, as the traditional payment giants, have a stable market in the C-party. According to historical reports of iResearch, in Q2 2020, China's third-party mobile payment transaction scale was 59.8 trillion yuan, up 8.8% year-on-year; Alipay and Tenpay occupy 55.6% and 38.8% of the market share respectively. It is obviously difficult to change the pattern of dual oligopoly in the payment market within a short time.

In addition to user habits, it is also difficult to compare ByteDance and Kuaishou with Alibaba and JD.com due to their different business positioning and underlying ecology. ByteDance and Kuaishou are more of an information platform and a social network, and that their derivatives, e-commerce and payment, are part of a move to improve the ecological chain.

At the same time, some of their customers also have the possibility to be converted into e-commerce and payment users, but its e-commerce business is difficult to become the next Alibaba and JD.com, so its own payment is also difficult to become the next Alipay and WeChat Pay.

Besides, the recent suspension of the listing of Ants and the strong regulatory oversight of financial technology has challenged the development of Internet giants in the payment and other financial services. The report pointed out that China's Internet payment market has not yet found a new outbreak point of scale after the disappearance of online lending. At present, more and more Internet payment companies are shifting from the pursuit of transaction scale to the pursuit of "payment + technology" comprehensive capability output, and are undergoing the transformation from "quantity" to "quality".

Nowadays, financial licenses with high monetary value and conducive to digital transformation, such as payment and consumer finance, have become the "standard equipment" of the giants. These financial licenses are not only conducive to improving the financial business segment, but also capable of being used in the digital economy, which also can promote the digital transformation of the giants in the context of the deepening digital development.

This is an article from Cailian Press (WeChat ID: cailianpress), written by Sun Shiyu, translated by Chris Yuan.