(Yicai Global) Aug. 1 -- China's three major telecom operators are advancing their mobile payment businesses and attempting to grab a share of the market from existing giants Alipay and WeChat Pay, run by Alibaba Group Holding Ltd. [NYSE:BABA] and Tencent Holdings Ltd. [HKG:0700] respectively.
The 'big three,' China Mobile Ltd. [NYSE:CHL, HKG:0941], China United Network Communications Ltd. [SHA:600050], also known as China Unicom, and China Telecom Corp. Ltd. [NYSE:CHA, HKG:0728], have all set up their own mobile payment subsidiaries. However, insiders believe that the late-coming mobile carriers will struggle in the market.
"China has a significant market, with over 100 existing banks all running well," said Luo Laifeng, general manager of Bestpay, a China Telecom subsidiary. He believes there is still room in the market for more third-party payment platforms.
Alipay's advantages lie in e-commerce, he said, while WeChat Pay leverages its use as a social messaging app. China Telecom has found different specialties with Bestpay, Luo added.
He believes one of these is payments for mobile top-ups. Since last year, China Telecom has been giving away Bestpay funds using 'red packets' -- a common way for Chinese to gift each other money.
"Previously, we attracted users by giving away mobile phones or top-up coupons, and now we've replaced those with Bestpay funds," Luo said. "Now users can only use this money through Bestpay. We're hoping to get 30 million users by year end using this approach. The goal for next year is 60 million users.
"We estimate it costs about CNY100 (USD14.9) to bring in each user, so we'll spend about CNY6 billion (USD893 million)."
In the first half of the year, the company gave away a total of CNY960 million worth of Bestpay funds to more than nine million users.
To popularize the approach, China Telecom released a 'red packet card' on July 28, targeting fans of domestic smart phone maker Xiaomi. As well as normal bundling services, Xiaomi users will receive Bestpay coupons when they top up their phone, which can only be used through the Bestpay platform.
However, insiders still believe this won't affect the dominant positions of Alipay and WeChat Pay.
In the first quarter of the year, China's third-party mobile payment saw CNY18.8 trillion (USD2.77 trillion) worth of transactions, with Alipay taking a 53.7 percent share and WeChat Pay 39.5 percent.