Whoever wins in mobile wins the market for the next decade. This is a generally held belief by internet companies in China. With many potential fights to pick up, mobile payment has become the battleground. Tencent, one of China’s biggest internet companies, is trying aggressively to catch up with the mobile trend and shifting its business focus to mobile payment.
Founded in 1998, Tencent has been widely known as the provider of the most famous instant messenger software in China– QQ. Since 20014, it began to expand its services into online gaming, from licensing games from South Korea developers to making its own games. In 2011, the company set its footprint in mobile by launching Wechat, a cross-platform instant messaging app. As of May 2016, the app has over 700 million active users and is the largest standalone messaging app in China by monthly active users.  Before the entry into mobile payment, Tencent has its business model as that of instant communication platform, with revenues generated mainly from advertisements and premium services on top of the platform’s free basic functions.
Mobile Payment in China
Payment in China has experienced a leap from cash to E-payment, a path different from most western countries where credit card use has been popular in between. By early 2006, credit card use was mostly confined to 5 star hotels in China’s major industrialized cities. Public transportation was still paid for in cash. Largely driven by the rise of E-commerce giant Alibaba and its online escrow payment service Alipay, Chinese consumers quickly adapted to mobile payment. According to data provider Euromonitor International, In 2015, China’s mobile transactions more than doubled to $235 billion, pushing China the world’s biggest mobile-payment market. 
Tencent’s fight in mobile payment market
Tencent’s opportunity in mobile payment lies in its 762 million Wechat app monthly active users, who may currently use Alipay, Tencent’s key competitor in mobile payment market to do daily purchase. In 2013, Tencent launched its own mobile-payment service tenpay, attached to wechat and spent heavily and smartly to convert Chinese users to the platform. In 2015, Tencent nearly doubled its mobile payment share vs. 2014 to reach 20%, taking share directly from Alipay, whose share dropped to 68% in 2015 
The benefits to win in mobile-payment market for Tencent are huge. It’s not about short-term financial gains, as currently Tencent charges no fees for setup, transaction or withdrawal between Tenpay services and only 1% transaction fee with instant payment to banks, but huge business potentials with million-level customer base and massive data in its service. One example has been to set up its own market fund and pool together customer money with a more attractive return than the interest rate from commercial banks in China. It also signed contracts with 1.1 million merchants spanning 20 industries including travel business, insurance, online shopping, logistics, clothing and education, to provide services to almost every walk of people’s life, using Tenpay payment services. It even has attempted to create its own online shopping platform, in order to build an ecosystem where people can stick with Tencent’s services to meet every single demand in daily life.
From an online instant messaging service provider to a conglomerate with subsidiaries in media, entertainment and partnerships in insurance, travel and online shopping etc. mobile-payment has enabled Tencent access to business beyond its original border. However, it also faces challenges to be further addressed in the future. One is governmental regulations. There is a big call for industry standard of mobile payment, especially in terms of data security and standard charges. Tencent needs to work closely with the government and gain involvement in standard setting in order to maintain competitive advantage in the future. Another challenge is to gain deeper penetration into China market. The use of mobile payment is predicated on the adoption of smartphones and the establishment of telecommunication infrastructure. What Tencent can do is to partner with telecommunication companies to speed up the development of these two conditions. Finally, while Tencent is considering expanding overseas, the sensitivity of payment puts up barriers for Tencent, as a foreign company, to enter into overseas market. Tencent needs to build its overseas image as well as product in order to gain differentiating attributes to enter into those markets.
 China 20/20: The Future of Mobile Payment in China (Arlyss Gease & Joan Qiu, 2012)
 China’s Mobile Payments Industry – What’s next (Kapronasia, 2012)