The Chinese tradition of giving gifts of money in red envelopes at Lunar New Year has turned into big business for Web giants Alibaba Group Holding Ltd (阿里巴巴) and Tencent Holdings Ltd (騰訊), which now both offer electronic hong bao (紅包).
At the end of each lunar year, it is customary in China to give children hong bao — small sums of money in envelopes that are red, the color of prosperity. But now the age-old practice is going high-tech.
It is now possible to exchange “red envelopes” via smartphone, which is proving a popular trend in China and has sparked a battle for the lucrative market between the two companies providing the service, Tencent and Alibaba.
“You don’t have to pay the same fees or wait as long as you would for a traditional bank transfer. It’s more convenient, simple and fun,” said Wang Le, a 28-year-old resident of Beijing.
The Year of the Sheep, which begins today, is an opportunity to relive the childhood magic of the lunar holiday at any age, according to Wang.
“I loved getting red envelopes when I was little, but it was only my older relatives who would give them, and only around the new year,” he said. “With electronic red envelopes, you’re not limited by your identity or the time of year. It’s a new, fresh way of playing the game.”
The idea was introduced last year by WeChat, a mobile messaging system with over 400 million users and operated by Tencent, China’s largest Internet service portal. It was immediately successful. Within 10 days, 8 million users had exchanged 40 million virtual envelopes. The minimum amount that can be exchanged is modest — 1 yuan (US$0.16) — and there is also the option of splitting a sum between several recipients.
This year, Alipay Wallet, the payment system run by online retail giant Alibaba, is ready to take on the competition. It is allowing its 190 million users to send digital gifts, notably via the Twitter-like Sina Weibo (新浪微博), in which Alibaba is a shareholder.
For the past few weeks a digital battle has been raging, with Tencent banning Alipay from sending red envelopes via WeChat, saying they posed a “security” threat. Recently, WeChat also blocked Alibaba’s music app Xiami.
To compete for the public’s favor, the two rivals have launched lotteries through which they award red envelopes to users in an online game. Tencent agreed to give out 800 million yuan in envelopes on its WeChat and QQ messaging apps over a ten-day period, with each one worth as little as several cents or as much as US$800.
For its part, Alipay has promised to give out US$95 million in envelopes as well as coupons and discounts totaling several billion yuan as part of its publicity quest.
“It’s great. I never thought that at my age, I’d be able to ‘reap without sowing’ like this,” said Wang, who frantically checks his phone each morning to see the flood of hong bao coming in.
It is easy to send and receive hong bao or participate in the lotteries: You simply need to register your bank details.
Once users have signed up, they are more likely to make spontaneous electronic payments, “especially given Chinese people’s tendency to make impulse buys,” according to Liu Xingliang (劉興亮), chairman of Hongmai Software (紅麥軟件), a Beijing-based Internet data analysis company.
“In China, people traditionally send red envelopes to celebrate the new year, so it’s quite an easy way to attract the public,” he said.
According to market research group iResearch, Alipay controls 82.6 percent of the Chinese mobile phone payment market, compared with 10 percent for Tencent’s Tenpay.
However, Tenpay only controlled 4 percent of the market before the red envelope campaign debuted on WeChat last year.
Alibaba founder Jack Ma (馬雲) has dubbed WeChat’s red envelope campaign a “Pearl Harbor-like attack” on Alipay.
The stakes are high. Last year in China, mobile payment transactions reached 7.77 trillion yuan (US$1.24 trillion), six times the amount the previous year, according to research group Analysys.
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