Wannabe WeChat Merchants: What You Need to Know

    WeChat Pay’s global expansion has been a hot topic of late and adopting Chinese mobile payment methods is touted as a must-do for U.S. businesses looking to attract Chinese customers.
    Photo: Shutterstock
    Lauren HallananAuthor
      Published   in Retail

    In China, digital colossus WeChat has been successful at luring customers to pay for everything from food to travel to luxury handbags on the company’s app. With nearly one-billion users and climbing, a key 2018 question for U.S. luxury retailers has become whether adopting WeChat and other Chinese mobile payment methods is mandatory for businesses looking to attract Chinese customers. And, if it is, are there right—and wrong—ways to do it?

    It’s true that adopting WeChat Pay can be a huge advantage for some brands — and there is considerable data supporting that Chinese travelers buy more when WeChat is available. But just as opening a WeChat messaging account doesn’t guarantee thousands of followers, global mobile pay experts warn that businesses should not expect that offering WeChat Pay will bring in a flood of Chinese customers.

    Here, we take a look at what types of businesses should consider the move, the benefits, the process, and what brands should be aware of before diving in.

    Understanding WeChat Pay’s Strategy Abroad#

    Tencent, the parent company of WeChat and WeChat Pay, is not targeting a broad user base in its international strategy. Instead, it has zoomed in on one target audience. They are following the footsteps of Chinese travelers, focused on enabling as many merchants as possible to accept WeChat Pay abroad, so Chinese tourists can always depend on WeChat Pay, no matter where they are.

    Because of this, right now, the majority of US brands and businesses adopting WeChat are either in the hospitality or luxury industries. Evelyn Yang, head of marketing and communications at Citcon, a payment partner of WeChat and of powerhouse rival Alipay in North America said that, in general, WeChat Pay can be found in coastal metropolitan cities that receive the highest numbers of Chinese tourists. For luxury retailers, those in New York, Los Angeles, and San Francisco have the highest adoption rates, and for hospitality, the leading city is Las Vegas. On top of that, more than ten major airports and duty-free retailers around the country offer WeChat Pay.

    This is not to say that other businesses and locations should not consider WeChat Pay, but businesses should not adopt WeChat Pay in the hopes of attracting more Chinese travelers. Instead, WeChat Pay should be seen as a tool that can improve the experience of Chinese travelers who already visiting a destination, demonstrating welcome. The best candidates are businesses that already deal with numbers of Chinese travelers.

    Making it Easy to Splurge#

    There are many benefits to providing WeChat Pay. Firstly, in the minds of Chinese consumers, WeChat Pay has already become a way of life, and it’s just as common, if not more common, to use WeChat Pay instead of cards or cash. To them, mobile payments are applicable for all types of purchases, from a three-dollar cup of coffee to apparel costing thousands. Other incentives for them to use WeChat Pay is that the spending limits are high, and fees are often lower than a credit card, exchange rates tend to be better and refunds are instant.

    “Accepting WeChat Pay means that a brand is China-ready and accommodating to the Chinese traveler with the most popular payment option in China,” explained Jeff Fish, co-founder of WeChat marketing agency TMG Worldwide.

    Possibly more importantly, having WeChat Pay may ensure that a company lands the sale.

    Yang pointed out that “If you don’t have WeChat Pay and their credit card doesn’t work, then you lose the sale. This is especially important for more expensive items, as it’s highly unlikely they would be carrying around enough cash to cover the cost.”

    The Outbound Chinese Tourism and Consumption Trends: 2017 Survey, jointly issued by Nielsen and Alipay, found that, for 41 percent of outbound Chinese tourists, the payment methods supported by local merchants are equally important as the absolute price and the relative price of the goods. Regardless of which generation the tourists belonged to or whether they were traveling within Asia or farther abroad, the question of which payment methods local merchants will accept is crucial to Chinese tourists. Furthermore, Citcon’s data has shown that travelers tend to spend more when using WeChat Pay compared to credit cards and cash.

    Getting Set Up#

    The process for U.S. brands: Tencent doesn’t directly handle overseas payments, so brands that are interested in adopting WeChat pay must go through a designated payment partner.

    Once they’ve contacted a payment partner, the process varies slightly depending on the type of business and industry they are in. At Citcon, businesses will first submit an application and then Citcon will do a background check to make sure the nature of the business isn’t illegal, and they will check to see if the business is suitable for WeChat Pay. In-store initial installment costs depend on the business’s choice to add a stand-alone POS terminal (best for smaller businesses) or integrate WeChat Pay into their payment system software (something large firms often need).

    While some businesses might wonder which is better, the more social-media oriented WeChat Pay or Alipay, which is backed by giant Alibaba, in reality, many businesses who decide to adopt Chinese mobile payment systems opt to offer both payment platforms.

    The bottom line is that, with relatively low barriers to entry, slow adoption by U.S. merchants comes primarily from a lack of knowledge. “The main challenge is understanding,” explained Fish.“We are currently educating brands on the power of WeChat with the Chinese consumer. With over a billion active users, a WeChat Official Account and WeChat Pay are no longer things that are ‘nice to have’, WeChat is a way of life in China and for the Chinese traveler.”

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