(ATF) Huawei has become the latest in a long list of Chinese tech companies to obtain a payment licence in a move that analysts say will enable the company to set up a foundation for a foray into the finance sector.
Information posted to the business data platform Tianyancha last Thursday showed that Huawei replaced Shanghai VRTime Technology to be Shenzhen Sharelink Network’s shareholder, owning 100% in the Shenzhen-based payments company.
Huawei did not reveal the value of the deal but some reports said it was under 700 million yuan ($107 million). A Huawei spokesperson said the company was not ready to release any information about the acquisition or future business plans.
Last month, the company started recruiting payment-related positions, such as those responsible for customer fund management, payment settlements, and bank partnership.
Song Qinghui, chief economist and founder of Shenzhen-based Qinghui Research, said the acquisition of a payment licence may pave the way for Huawei to grab a piece of China’s digital currency market and explore more room for growth.
China is one of a few countries that have achieved significant progress on implementing a central bank digital currency. Having conducted trials in major cities such as Shenzhen, Suzhou, Beijing and Chengdu, the central bank plans to demonstrate the country’s official digital currency at the Winter Olympics in Beijing next year.
An advantage for Huawei to tap the mobile payments market is its large number of smartphone users, Song said.
The company’s self-developed app distribution platform, AppGallery, has 530 million monthly active users and 2.3 million registered developers around the world, according to the latest data released by the company.
But as a new player to the market, Huawei is not expected to be a threat to WeChat Pay or Alipay any time soon, he noted.
WeChat Pay and Alipay together have over 90% of combined market share in China’s mobile payments market, according to iResearch.
Payment company set up by ZTE
The Shenzhen-based payments company was first established in June 2013 by ZTE Software, an affiliate of Huawei’s rival, telecom equipment maker ZTE Corp. In 2015, ZTE launched a self-branded mobile payment service that supported shopping, bill pay, transportation card top-up and wealth management functionalities.
ZTE later decided to divest Sharelink when the company continued to incur losses. In August 2016, ZTE sold its 90% stake in Sharelink for 385 million yuan ($58.7 million) to VRTime, a wholly-owned subsidiary of fintech service provider e-Capital Transfer. In January 2018, ZTE sold its remaining 10% stake in Sharelink.
Records from the People’s Bank of China website show that Sharelink obtained a licence in July 2014 for operating nationwide online, mobile and digital TV-based payment businesses.
Huawei becomes another Chinese smartphone maker with a payment licence after Xiaomi obtained a payment licence in 2016 through the acquisition of payments company Jiefu Ruitong.
Apple Pay, offered by Huawei’s rival Apple, had about 90% of market share in China’s Near Field Communication (NFC) payment market in 2017. NFC is a wireless technology that enables devices within a few centimetres of each other to exchange information wirelessly.
Chinese smartphone makers, OPPO and Vivo, have also tapped into the finance sector. The two companies obtained a micro-lending licence by jointly acquiring Chongqing-based Longxie Credit in 2019, and both offer micro-lending and wealth management services.
Most of China’s internet giants, such as Alibaba, Tencent, Baidu, Meituan, and NetEase have obtained payment licences.
Last year, fast-growing e-commerce company Pinduoduo, TikTok’s parent ByteDance, online travel company Ctrip, and short video app Kuaishou all obtained payment licences by way of acquiring another firm. A payment licence helps these companies to save on third-party transaction fees and gain more access to transaction data.
The acquisition of a payments licence by Huawei is not unexpected given that the tech giant has previously made forays into related operations in recent years.
In 2016, Huawei partnered with China UnionPay to launch an NFC-based payment service called “Huawei Pay”.
In July of last year, it launched a point-of-sale mobile payment solution for small businesses. In September of the same year, it teamed up with China CITIC Bank to launch a joint credit card.
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