Alibaba's Taobao Accepts WeChat Pay: Good or Bad?

Some critics argue that the top-down approach in China has its drawbacks. However, every system has its pros and cons, and one recent positive outcome is the increasing interoperability between major tech platforms. A prime example is Alibaba’s Taobao now accepting WeChat Pay. Since 2021, the Chinese government has pushed tech giants to dismantle their "walled gardens," and this move is part of a broader effort to foster competition. Prior to Taobao’s shift, other Alibaba subsidiaries like Ele.me and Youku had already started accepting WeChat Pay. Additionally, WeChat users can now join Alibaba’s DingTalk meetings without needing the DingTalk app. Even WeChat, which once restricted external links to competitor sites, now allows Taobao links. Meituan, a rival to Alibaba’s Ele.me, also gained access to the Alipay platform. These instances of increased interoperability are making Chinese platforms more open and interconnected.

This development helps explain why the State Administration for Market Regulation (SAMR) officially ended its antitrust review of Alibaba—because the "walls" have been broken down. While some fear that this might weaken Alibaba’s moat, simply blocking competitors isn’t a true competitive advantage. True competitiveness lies in offering superior products and services. By embracing interoperability, Alibaba and other businesses are forced to strengthen their core offerings to retain customers.

A similar example in the West is the relationship between Apple and Microsoft Office. While Apple has its own iWork software (Pages, Numbers, Keynote), it still allows Microsoft Office on its ecosystem. This benefits both companies—Apple sells more devices because customers who rely on Office can still use it, and Microsoft benefits from broader usage, making Office more entrenched and platform-agnostic.

In China’s unique app ecosystem, users of WeChat or Alipay can access other apps within those platforms, known as mini-programs. For instance, you don’t need to download the DiDi app to book a ride—you can do it directly within WeChat or Alipay. This level of integration is highly convenient and may actually attract more customers. Therefore, for Alibaba’s Taobao to succeed, it needs to focus on being the best e-commerce platform and ensuring that Alipay remains a ubiquitous payment system, rather than relying on restricting competitors' services on its platform. This strategy will allow Alibaba to compete on the merits of its offerings rather than through artificial barriers, fostering stronger customer loyalty and long-term success.

During a recent visit to Chengdu, we noticed that WeChat Pay was more dominant than Alipay. By accepting WeChat Pay, Taobao can attract users who prefer that payment method and may have previously hesitated to buy on Taobao. While Alipay might lose some fees, these WeChat-centric users weren’t its customers in the first place.

China's payment systems have evolved rapidly, benefiting both locals and foreigners. Several years ago, foreigners needed a local phone number and bank account to use WeChat Pay or Alipay. Over time, this requirement was eased, allowing foreigners to use WeChat Pay once their account was verified. Alipay followed by introducing the Alipay Tour Card for foreign users. The latest development allows foreigners to link Visa or Mastercard to both WeChat Pay and Alipay, with higher spending limits.

In terms of payment technology, China is leading the world. WeChat Pay now offers palm recognition payments, while Alipay has introduced facial recognition payments. Users no longer even need to take out their phones to scan QR codes.

Overall, Taobao’s acceptance of WeChat Pay is a positive step forward. Increased competition tends to drive better products and services for customers. The two dominant payment systems—Alipay and WeChat Pay—still control more than 90% of the Chinese market, and enhanced interoperability only strengthens their appeal to users, not less.