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Expert opinion

The quantum leap of WeChat: could it work in the West?

Friday 24 June 2016 | 10:09 AM CET

Oren Levy, Zooz: The adoption of the WeChat model would entail a restructuring of Western financial processes

Calling WeChat a Chinese app is like describing Mt. Everest as a hill. WeChat is the mother of all apps: a Chinese messaging platform that contains some 10 million third-party apps. As of December 2015, it had 650 million monthly active users. While Western messaging platforms are currently trying their hand at luring customers in through advertising, the WeChat platform has monetized itself successfully by offering P2P payments.

Social media channels like Facebook are dipping their toes into the waters in order to offer payment options, but brand and user response is at best only lukewarm. Activate predicts that there will be 1.1 billion new users on mobile messaging platforms such as Facebook Messenger and Snapchat by 2018. So why haven’t Western brands and consumers emulated the WeChat model?

The uniqueness of WeChat

First, it is important to understand that the WeChat model has no counterpart in the West. It can best be described as a mixture of WhatsApp, Facebook and Skype. Partial Western counterparts include Venmo, which offers the ability to make P2P payments by linking a Venmo account to a bank account, debit card, or credit card. After making a transaction, users can share the related data with their networks of friends.

WeChat offers more extensive services and payment options. While it started out as a simple messaging app for sending texts, this single integrated “app within an app” now enables users to get bank statements, pay bills, offer food, read magazines, set up appointments and much more. While the West is still dithering about the relationship between the web, social media and mobile, WeChat has accomplished a quantum leap by synergizing the ubiquitous smart phone with the platform’s own unique wallet, which enables users to carry out a wide range of activities without ever leaving the app.

How the WeChat concept is alien to Western economies

Before deciding whether a WeChat model could work in the West, we must first perceive that its basic foundation is somewhat alien to the economies of democratic societies. WeChat contains a widespread network of companies that exist as no more than “official accounts.” These companies lack leverage due to the fact that WeChat runs the platform according to its own rules. This model hardly encourages the spirit of free competition that is so central to Western economies.

In addition, one of the reasons for WeChat’s resounding success in China is the all-inclusive WeChat Wallet, which enables the seamless performance of a very wide range of transactions on the WeChat platform once users link their bank account or credit card. While Western financial processes are still reliant on a classic payment structure with banks at the epicenter, the WeChat payment model has shifted to direct, front-end consumer relationships where banks serve merely as conduits to move money. The adoption of the WeChat model would entail a restructuring of Western financial processes.

Can WeChat work in the West?

Despite the caveats mentioned above, the question must be asked – can the WeChat model work in Western countries? Yes, but only when it sheds preconceived notions that limit the role of mobile messaging to socializing, texting and sending. This also means removing the blinders when it comes to using mobile phone features in inventive ways; for example, the camera can be used to scan texts for translations or bills for payment, while the built-in microphone can be utilized to identify a TV show.

Perhaps the largest obstacle of all would be the redefinition of Western financial and payment paradigms to suit the WeChat model. China is a centralized society accustomed to controlled financial and payment structures, which lends itself to unified platforms. Competitive payment methods and financial entities proliferate in Western countries, making consolidation unrealistic.

Setting the stage for WeChat

Several processes took place in 2015 that set the stage for a Western style WeChat: For one thing, the use of mobile apps among Western audiences leapt by 58% (accounting for nearly 33% of all US online commerce). Nevertheless, most Westerners who regularly download apps admit that they only use a handful of them. So the “app within an app” structure employed by WeChat is a way to streamline and simplify mobile use.

In addition, messaging apps, which saw triple-digit growth in 2014, became platforms offering more than mere communications, including payments and games. Private messaging took a giant step towards coming of age, when Facebook acquired WhatsApp for USD 22 billion. This synergy set the stage for a WeChat type structure offering a one-stop-shop for socializing, reading, shopping, making payments, and more.

Budding US emulations of WeChat

We are now seeing growing interest on the part of Western platforms to emulate the WeChat structure: Facebook is currently testing its first user-to-business messaging capabilities through its Messenger Platform. At the end of last year, Kik introduced a new feature a new messenger platform called Kik Codes, which enables users to chat with a peer or join a group chat using something similar to a QR code. SnapChat also added payments to its offering not long ago.

Users send 30 billion messages daily on WhatsApp alone, so it makes perfect sense to offer games, commerce, payments and other activities on the same popular platform. Despite various caveats and constraints, the time is ripe for the “app within an app” structure which is the foundation of WeChat.

About Oren Levy:

Oren Levy is an experienced professional with over 15 years’ experience in payments, commerce and global business. Prior to Zooz, Oren was an executive director at Brookline (USA) for 11 years, managing its worldwide sales efforts and strategic partnerships initiatives. Before Brookline Oren held marketing, business development and technical positions at BATM, Fundtech and L.G.E.S.

About Zooz:

Zooz provides a payments platform designed to help merchants maximize their payments performance. It offers the flexibility to connect with multiple financial institutions, seamlessly integrate acquirers, e-wallets, alternative payment methods, fraud management and other third-party services, and intelligently route transactions through the entire payment process. Zooz consolidates and analyzes all payment data to provide valuable information to merchants, enabling them to personalize customer experiences online and in-store. It is the partner of choice for any business seeking to extend reach, reduce decline rates, increase revenues, maintain strong customer relationships and meet the challenges of the dynamic global market.