WeChat Pay and Square are going to the UK

WeChat, China’s most popular social media and messaging service, has launched a new bid in Europe and the U.S. to develop its payments offering and win new advertisers. Owned by Tencent Holdings Ltd., WeChat is looking to launch an office in the U.K. and another European country, alongside its existing presence in Italy. Tencent, which has an established office in San Francisco, is also looking to grow its WeChat team in the U.S., targeting advertisers and payments providers.

WeChat, which also hosts payments and brand pages, has more than 889 million users in its home country, yet remains largely unused outside of its home country. It is not the first time WeChat has attempted to win over Western users. In 2013 the app hired soccer star Lionel Messi in a high profile campaign outside of China.

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In Europe, the focus is first on fashion and luxury goods, and will in time expand to travel and broader retail services. WeChat is hoping its expansion in Europe will convince more high-profile brands onto the platform, not only to reach consumers in China, but also Chinese tourists visiting Europe. Goldman Sachs estimates that 220 million Chinese tourists will travel overseas by 2025, up from 120 million in 2015.

Tencent’s payment business is booming, as its average daily transactions topped 600 million a day in December. Chinese consumers are using the service to pay for everything from ride-hailing to food takeout.

But while WeChat has been one of the leading providers in offering chat-based payment systems, its global competitors have been ramping up the competition. Facebook Inc., which owns WhatsApp, has been expanding its payments offering within its messaging apps, while Alibaba Group Holding Ltd.’sfinance affiliate has been busy pushing Alipay in Europe. “Tencent could be trying to do what Alipay is doing,” said Sun, “but there’s much more uncertainty in terms of when the business could take off, as it would need to overcome many regulatory hurdles.”

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Mobile payments company Square is finally landing in Europe with the news today that it’s now open for U.K.-based business owners. This launch represents the fifth market for Square, after the U.S., where it has been available since 2010; Canada (2012); Japan (2013); and Australia (2016).

Given the different regulatory hurdles in each country, Square has to take a market-by-market approach to its launches, which is why it has only been available in four markets until now. “We’re looking at our next markets, but we need to ensure our next markets are thriving,” continued Jack Dorsey. “When we get that confidence, we’ll continue to build out.”

It’s worth noting here that Square Point of Sale has actually been available in the U.K., among other markets around the world, for a few years already, but it has so far lacked the full capabilities of the version that’s available in Square’s four main markets. On its own, the app allows businesses to record payments made with cash and gift cards, print or email receipts, and access real-time and historical sales data. But crucially it hasn’t been offered as part of Square’s broader payments business in the U.K. — and it hasn’t enabled card payments through Square Reader. While Square has been incorporated in the U.K. since 2014, it hasn’t really operated as a business, as such. Square makes its money by taking a cut from each card transaction, meaning without such functionality Square has essentially been dormant in the U.K. — until now.

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In some respects, Square is fairly late to the B2C mobile payments table in the U.K. Sweden’s iZettle, which is a near-identical proposition to that of Square, has been available in the U.K. for five years already. And last year, European rivals SumUp and Payleven merged to consolidate their collective presence in 15 markets — including the U.K. Dorsey, for his part, says he isn’t concerned about existing players in its field. “We don’t believe we need to be first, we just need to be the best,” he said.

Square is doing well at the moment in its existing markets — its most recent financials revealed that it grew transactions 39 percent to $50 billion in 2016, though it still isn’t profitable. The company’s shares have peaked and troughed since it went public in November 2015, hitting a low of $8.63 in February 2016, well below its inaugural trading price of around $13. However, its shares have enjoyed a resurgence in recent months, spiking at $17.43 in the wake of its Q4 financials, a level the company has maintained in the four weeks since.

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The Square Reader will cost U.K. firms £39 each, which is on a par with the U.S. pricing. But interestingly, U.K. merchants will only pay 1.75 percent on each in-person transaction, compared to the 2.75 percent flat fee charged in the U.S. And retailers integrating with Square’s API to process online payments through their website will pay 2.5 percent. Contactless payments are now the norm across the U.K., so it makes sense that Square is bringing the NFC version of the reader to market, rather than requiring merchants to swipe the card through the terminal.

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Square wouldn’t comment on U.K. plans for its other products, including peer-to-peer payments service Square Cash, food-ordering service Caviar, or small businesses financing service Square Capital.

The UK loves its plastic. In January of this year alone, British consumers spent over £57.1 billion (roughly $71.5 billion) via credit and debit cards, according to the UK Cards Association. In total, Brits made a record 1.4 billion card payments. There’s an entire sector of the economy that’s still stuck in the stone ages. Taxis are largely cash-only. So too are tradesmen, like plumbers, carpenters, and handymen. And anecdotally, I’ve noticed that pop-up food stands and independent traders are resistant to the march of the credit card. If you go to a farmers market, or a trade show, you’d best remember to withdraw a load of cash beforehand, as was the case when I went to the UK Cake and Bake Show last year.

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