Digital payments in China: adoption and interactions among applications
Le paiement numérique en Chine : adoption et interactions entre applications
Résumé
Alipay and WeChat Pay, the mobile payment services of Alibaba and Tencent, rapidly spread out in China from the early 2010s. Their successes motivate three open questions: (i) why the two companies did not really compete to gain the exclusivity of their clients? (ii) why the installed basis
of the incumbent did not prevent the success of the entrant? (iii) why the new entry accelerated the dffusion of the incumbent's solutions? This paper elaborates an adoption model which encapsulates the distinctive features of the two service providers. It points out that complementaries between the two solutions (dfferentiated services offered to clients, decreasing adoption costs and contrasting business models) can explain the interest of both service providers to avoid any strong competition. During the adoption phase, Alipay and WeChat had interest to a mutual development as soon as they did not offered the same product, with the same business model. In this situation, every improvement of the technology of each operator increased the profit of the other. This strategic complementarity effect between the two competitors could however decrease during time their incentive to innovate.
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