Beijing asks WeChat to lower its mobile payment share amid digital yuan pilot

China’s regulators have asked Tencent Holdings to reduce WeChat’s mobile payments market share, just weeks after Beijing launched a digital yuan pilot in Hong Kong.

Tencent Holdings is reportedly under pressure from Chinese regulators as Beijing wants the tech giant to reduce the mobile payment market share of its WeChat app, Nikkei reported, citing three sources familiar with the matter. It appears that the demand primarily targets market share for in-person payments via QR codes rather than online shopping.

Although exact numerical targets for WeChat Pay’s decline in market share have not yet been determined, a person close to the company told Nikkei: “WeChat is not aiming for user expansion and is very cautious about the potential risks of growing too much.”

China’s mobile payment ecosystem is currently dominated by WeChat Pay and Ant Group’s Alipay, despite the presence of approximately 185 non-bank payment institutions. While the exact reason behind the latest move remains unclear, the regulatory push dovetails with Beijing’s efforts to encourage the adoption of its state-backed digital currency, the digital yuan, also known as e-CNY.

Since its pilot launch in 2020, the digital yuan has struggled to gain significant traction; some authorities choose not to hold their money in e-CNY due to lack of interest and limited availability concerns

“I prefer not to keep the money in the e-CNY app because there will be no interest if I leave it there.”

Sammy Lin, account manager at a state bank in Suzhou

The latest move comes less than two weeks after China began its first pilot outside the mainland, with the digital yuan now available in Hong Kong. According to the Hong Kong Monetary Authority, local residents can load up to CNY 10,000 (about $1,385) into digital wallets through 17 retail banks in Hong Kong, although they are prohibited from making peer-to-peer transactions.

As Nikkei points out, China’s mobile payment market is quite lucrative. According to data from consulting firm Analysys, total mobile transactions through third-party service providers exceeded 92 trillion yuan ($12 trillion) in the first quarter; This includes 15.59 trillion yuan from QR code transactions.

The Chinese government’s directive towards Tencent appears to be part of broader efforts to ensure private tech giants do not overshadow the state-backed digital currency. By reducing WeChat Pay’s market share, Beijing may be trying to create more room for the digital yuan to grow and integrate into its citizens’ daily financial lives.