We look at (1) Tencent’s key financial products, (2) the ways in which Tencent poses a threat to incumbents, and (3) where incumbents can build, buy, and partner to compete.
In China, Tencent is synonymous with mobile gaming and messaging. But financial services is quickly becoming a key third source of revenue as the internet giant faces headwinds from more stringent regulatory reviews in gaming that have curtailed profit growth.
There are three main ways in which Tencent currently makes money through financial services:
- Commercial transaction processing fees from vendors for use of WeChat Pay
- Users who pay cash withdrawal fees and credit card repayment charges
- Financial institutions, including Tencent’s private bank affiliate WeBank, paying service fees for the distribution of financial products
Like its rival Ant Financial, Tencent is rapidly expanding beyond its start in digital payments into lending, wealth management, and insurance. Tencent’s fintech strategy has hinged on its ability to cross-promote financial products to its massive WeChat and QQ user base of 1B+ daily active users and leveraging its expertise in gamification techniques to boost growth.