[Answer] How should we view Alipay charging a service fee on credit card repayments above 2,000 yuan, following WeChat’s earlier move to charge for credit card repayment? What is behind this adjustment?

[Answer] How should we view Alipay charging a service fee on credit card repayments above 2,000 yuan, following WeChat’s earlier move to charge for credit card repayment? What is behind this adjustment?

When it comes to payments, Alipay has always taken a more user-friendly and accessible approach, while WeChat, from the very beginning, carried itself from a higher position and offered relatively limited or even no discounts in areas such as cash withdrawals and credit card repayments. Yet despite that, WeChat Pay’s share still rose rapidly. Ever since WeChat emerged as a competitor, mobile payments went almost overnight from Alipay’s one-sided dominance to a market split between two giants. The reasons are not complicated.

Because of WeChat’s enormous user base, its customer acquisition cost is very low and user stickiness is extremely high—something nearly unmatched anywhere in the world. Alipay is positioned as a payment tool, and of course a small portion of users may believe that a specialized payment tool has advantages in reliability and security. But once the majority of users prioritize convenience, that advantage essentially disappears. Aside from early internet users, most newer internet users had previously had little or no contact with the internet at all. For these users, learning to use WeChat is worth the effort, especially when everyone around them is already using it, whereas Alipay is a product that feels challenging without seeming necessary. WeChat’s confidence and “high posture” also come from this reality. Being able to achieve enormous success while still charging where possible is a devastating blow to Alipay. Given enough time, that gap may widen further.

Under such circumstances, Alipay’s announcement that it will charge for credit card repayment is very likely a major strategic blunder, one that could completely squander the little fee advantage it still had left. For users without much experience operating apps—especially middle-aged and elderly users—simply learning to use WeChat Pay is already a major achievement, and Alipay will never attract this group anyway. But for traditional Alipay users who are sensitive to price changes, choosing Alipay over WeChat may very well have been based on fees. This policy could amount to self-inflicted damage, driving those wavering customers fully into the arms of a competitor. Perhaps Alipay conducted detailed assessments and analysis before making this decision, but in the current tense environment, every customer lost could become the final straw that breaks Alipay’s back.

There is another possibility: Alipay made this decision with full awareness of the situation, knowingly accepting losses and effectively cutting off one of its own arms. If that is the case, it is even more dangerous. If Alipay is being forced into this move under heavy competitive pressure, then it likely means the company is already under severe strain. And when two major powers are locked in a contest, a seemingly trivial disturbance can become the beginning of total defeat—like in martial arts novels, where two masters locked in an inner-power duel are both killed instantly because of a stray fly. For Alipay, once it abandons its price advantage, the only trump card it has left is its tight integration with Taobao. But on that front, Tencent’s ecosystem already has JD.com watching closely, while Pinduoduo, NetEase Yanxuan, and a host of other competitors are waiting for their chance to rise. Taobao itself is already approaching a state of being besieged on all sides. If Taobao and Alipay remain bound tightly to one another, the outcome may resemble what happened with Microsoft and Nokia in the Windows Phone era.

Of course, there is also the possibility that this is simply a competitive strategy. Alipay may believe that the additional revenue from charging a small fee will outweigh the losses. When the bear comes, you do not need to run faster than the world champion—you just need to run faster than the person beside you. Since WeChat can charge fees, why must I remain free instead of simply being a little cheaper than my rival? From the user’s perspective, this is certainly a despicable but normal tactic. But Alipay may be overlooking user psychology. If WeChat were to announce even a slight reduction in fees, it might be greeted with overwhelming applause; but for Alipay, going from zero to charging at all is a very different matter. The number of users who may walk away after this step could far exceed Alipay’s expectations. At a time when “internet thinking” has been so heavily promoted that it is now overhyped, Alipay’s apparently regressive decision inevitably makes one wonder whether this could be the first sign of its decline—from blazing noon to fading dusk.

Looking more broadly, players like Baidu and Cloud QuickPass may currently seem like weak competitors (Baidu made a foolish move with its Spring Festival Gala push, and Cloud QuickPass has failed to capitalize on a strong hand), but the internet world is notoriously unpredictable and fickle. One small misstep can cost everything. Among the other giants that remain optimistic about the mobile payments market, Alipay’s act of cutting off part of its own advantage could very well present a valuable opportunity. Who is to say otherwise?