ByteDance moves into digital payments amid antitrust rules
ByteDance – the company behind the popular video-sharing app TikTok – has launched a third-party payment service for Douyin, the Chinese version of TikTok. The service is called Douyin Pay and will allow the company to use its 600 million daily users to grow its ecommerce presence.
The digital payments market in China is currently dominated by Alipay and WeChat Pay, with the duopoly making up over 90% of the market. However, ByteDance is seizing the opportunity to enter the digital payments space at a time when Chinese regulators are tightening their grip on powerful tech companies. The new antitrust measures, which for the first time directly tackle anti-competitive behaviour in the internet sector, have the potential to reshape the digital payments market in favour of new entrants.
Light touch banking regulations enabled Alibaba and Tencent to grow into vast and ubiquitous online financial services businesses. Now the Chinese government views these companies as too powerful, too independent, and potentially a systemic risk to the Chinese financial system.
The new regulation aims to stop anticompetitive practices such as those used by Alibaba and Tencent in the “pick one of two” tactic, which forces sellers to sell exclusively on their respective platforms. Similarly, Tencent’s WeChat messaging app does not allow users to share content from Douyin or click links that would take them to products on Alibaba’s ecommerce site Taobao. For its part, Alibaba has blocked shoppers from using WeChat Pay on its Taobao and Tmall sites. Under the new regulations, larger platforms may be forced to open up and share data with their rivals with the aim of creating a level playing field in China’s fintech industry.
The government has demonstrated that it is willing to take a hard stance against China’s technology giants. In early November 2020, two days before Alibaba affiliate Ant Group was due to raise $35bn through an IPO, the Chinese government imposed new regulations on Alibaba and Ant Group. Ant’s lack of compliance at the last minute led the IPO to be suspended.
India is also setting the antitrust agenda
While China’s main goal with antitrust measures is to control increasingly powerful domestic fintech companies, Indian regulators are more concerned about ensuring that Indian companies can compete on a level playing field with non-Indian companies.
Past regulation in India has championed the domestic tech sector through a string of “India first” initiatives, often at the expense of foreign companies. The ecommerce regulation introduced in 2019 is a good example: the law prevents foreign companies from managing their own inventory and stock in the country, targeting the business models of companies like Amazon and Flipkart.
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Main image credit: Mercurious / Shutterstock.com
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