CAPE TOWN, South Africa -- As technology hubs from Silicon Valley to Bangalore work hard at devising digital approaches to finance that could alter the global banking landscape, mobile banking penetration in China has already exceeded 390 million people. And for Chinese-owned Tencent Holdings, the world's fifth largest Internet company, China's 1.3 billion-strong market is just the beginning. The tech giant's best-known social network, WeChat, is fast gaining traction in Africa, and mobile banking is one area in which its influence is spreading.
Outside China, WeChat is largely misunderstood. Referred to as "Twitter on steroids" as often as WhatsApp's "rival messaging service," the mobile app has arguably outgrown even its Chinese name, Weixin, which translates as "tiny message." Five-year-old WeChat is far more than a social network or messaging service. The mobile app can perhaps be more accurately described as a gamified WhatsApp-Facebook hybrid, with all the social applications of both, along with a Tinder-like dating feature, voice and video calls and a multi-functional digital wallet, all rolled into one.
The African market is a logical next step in WeChat's growth trajectory. The majority of Africans will first gain access to the Internet through mobile devices, and acquiring market share during the relatively early stages of Internet adoption on the continent is key.
The African market is a logical next step in WeChat's growth trajectory.
"They've missed the entire desktop, PC, laptop, whatever thing, and because of that, I think we're seeing innovation come out of Africa from a mobile perspective that is just leagues ahead of anywhere else on earth really," said Brett Loubser, the head of WeChat Africa.
The local insight that is steering Tencent's expansion into African markets -- and South Africa's in particular -- stems from a longstanding partnership between the Chinese firm and Naspers, Africa's biggest media company. Naspers acquired a 46.5 percent stake in the Chinese startup in 2001 for $32 million. Fast-forward to the present, and Naspers' stake (now diluted to 34 percent) is worth approximately $65 billion, a staggering 95 percent of its market capitalization on the Johannesburg Stock Exchange.
Despite accusations that Naspers is riding on Tencent's coattails, South Africa's biggest media group's experience in Internet services, print media and the continent's biggest pay-TV business is invaluable to Tencent. The two firms have formed the joint venture, WeChat Africa, to focus their efforts on continent-wide expansion.
WeChat is already estimated to have some 5 million registered users in South Africa. By contrast, U.S.-based WhatsApp, which was acquired by Facebook in February 2014, gained its over 10 million-strong South African user base over a period of seven years.
WeChat's success at home will no doubt be difficult to replicate outside China, but much of its experience in a developing market with no revenue model can be applied to Africa, too.
WeChat's success at home will no doubt be difficult to replicate outside China, but much of its experience in a developing market with no revenue model can be applied to Africa, too. When Tencent launched its original instant messaging service QQ in 1998, just 0.2 percent of China's population were Internet users, according to World Bank data. Today, digital banking, investing and lending have gone mainstream in China, with millions of consumers skipping straight from cash to mobile finance. The African market shows similar potential.
"If you look at the landscape in Africa from a mobile money perspective, Africa is leading the charge globally, we are way ahead," Loubser told Memeburn.
South Africa's launch of the WeChat Wallet in November 2015 may well be the point of no return. The mobile wallet service operates in partnership with Standard Bank, Africa's largest lender by assets, which is also part-owned by China's ICBC bank. It facilitates peer-to-peer money transfers, prepaid electricity and mobile phone credit purchases, as well as in-store payments at merchants supporting the popular Standard Bank-owned mobile payments platform, SnapScan. WeChat Wallet's users don't even need to have a bank account, which opens up access to a separate segment of the market. It also puts WeChat one step closer to being the one-stop platform for a whole new generation of Internet users.