No, simply adding payment to messaging apps don’t make people use it.
TLDR
In China, Wechat Pay took off like wildfire back in 2014 and exponentially grew over the following 2 years with perfect execution that digitalize deep rooted cultural behaviors, gamification and competitor investments to cement its place in history.
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The commonly accepted wisdom/narrative about Wechat Pay’s success outside of China is that simply making payment available in a messaging app and it will simply take off and go to the moon. This wisdom/narrative is not only broadly accepted in the tech community outside of China and it is what many regulators around the world generally believes. It is one of the main reasons why they are so concerned about Meta Platforms entering into payment space within WhatsApp and Messenger.
Unfortunately, the devil is in the details in the story of Wechat Pay’s success and not enough attention and recognition is paid to Tencent’s consistent execution to embrace cultural phenomenal.
The Stage
Wechat Pay launched in late 2013, it is a wallet where users can fund it with debit cards, and it has a core set of features, such as P2P, utility bill pay and mobile top up. At this time, we are in the age of iPhone 5/5s/5c and Wechat has about 300 million MAP and Wechat Pay has about 30 million users total. Alipay, with 300 million users at end of 2013, the most dominating and undisputed digital wallet king in the world (Yes, bigger than PayPal and Venmo), has over 90% market share in China, near total dominance.
The Chinese (Lunar) New Year, the most important holiday in China, where families all gather to celebrate and exchange gifts and it is usually 5 to 7 days off at minimum. For over a thousand years, it is a tradition and custom to exchange cash in red packet (or envelop) as gifts between family members and friends.
As early as 2012 Chinese New Year, Alipay has tried to digitalize virtual red packet experience. In the initial version, recipients would visit a specific Chinese New Year promo website, login with Alipay account and specify gifting amount to create a QR code. The QR code would be shared by the recipients, willing gifters can scan it with Alipay app and confirm to gift the specified amount. It had limited success due to high friction and QR code’s popularity were not yet ubiquitous.
Since 1983, on the eve of Chinese New Year, there is a national TV show called New Year’s Gala. Over the years, it has become the most watched show on earth. It has become a more modern tradition where family gather for dinner and watch the gala all over the country. In 2015, it attracted over 800 million viewers. For comparison, Super Bowl LVI attracted about 112 million viewers.
What Happened
2014
Just prior to Chinese New Year, Wechat Pay made sending red envelop feature available. One can either send money directly to a recipient for fixed amount or more importantly distribute a fixed sum randomly among a group of friends, lottery style.
For example, I can send $20 to Anna, Jenny and Ruben in a group chat. Wechat Pay will allot this $20 randomly to my 3 colleagues, leaving lucky Anna with $10, Ruben with $6 and poor Jenny with $4. Receivers have to click on the red envelop to find out how much they have received. And there is always a race to click first, because rumor has it that whoever clicks on it first would get the largest amount.
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This gimmick has fueled Wechat Pay’s usage. In the first 2 days of Chinese New Year holiday, over 5 million users participated in this scheme, exchanging over 20 million red envelops in the process.
Jack Ma, founder of Alipay, later described this as the “Pearl Harbor Attack” on Alipay.
2015
In 2015’s Chinese New Year Gala, Wechat Pay introduced the lucky giveaway during the Gala where users “shake” their phones with Wechat app open and they will have a chance to win red envelopes. Wechat spent $8.1 million USD to get the TV rights. A total of $83 million USD worth of red packets were sent out during this event, sponsored by third party brands. An estimated 36 million users claimed red packets while watching the show. After the show ended and during the holiday week, a further $484 million USD worth of sponsored red packet were distributed.
The success of this campaign fueled Wechat Pay’s growth and gave it a foundation to compete with Alipay in commerce for both online and offline use cases. The organic behavior of sending and receiving virtual red packet has become a cultural meme and it has turned payment as a message.
Later in 2015, not to be outdone, Alipay spent over $40 million USD to acquire the TV rights to run similar red packet giveaway campaign during the Mid-Autumn Festival Gala. Despite losing out the chance to run another campaign, it doesn’t really matter for Wechat Pay at this point, because organic behavior have completely taken over. Over 100 million users have sent red packet to friends and family with no prompt or promotion 7 months after the Chinese New Year campaign.
Aftermath
During the 2016 Chinese New Year holiday season, 420 million Wechat users sent 8 billion red envelopes in a single day on New Year Eve. At one point, over 400k red envelopes were sent per second. For reference, PayPal had around 4.9 billion transactions for the entire year of 2015.
By the end of 2016, Wechat Pay has achieved over 38% mobile wallet usage market share from < 5% 2 years ago. An astounding feat by any measure.
Takeaways
- Digitalize deep rooted cultural behaviors
- Keep it simple and not impose unnecessary new behaviors
- Gamify the experience that is unique and possible only in the virtual world
- Invest heavily in marketing to reach “escape velocity” on sustained organic behavior
- Excellent engineering execution to capitalize on product success