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Alibaba Loses Part Of Walmart’s Payment Business

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Alipay was processing payments in all Walmart stores in China

Alibaba (BABA) is gearing up to release its financial results for fiscal 4Q18, which saw the company lose Walmart’s (WMT) mobile payment business in parts of China. In March, Walmart announced that it was dropping Alipay in all stores in western China. Walmart replaced Alipay with Tencent’s (TCEHY) WeChat Pay as its preferred mobile payment processor in these stores. Alipay, Alibaba’s mobile payment service, is run by Alibaba affiliate Ant Financial, which tried to acquire MoneyGram (MGI) before it was blocked by the US government. Before Walmart decided to go with WeChat Pay in its western China stores, it had been using Alipay to process mobile payments in all ~400 of its stores in China.

Alipay processed 1.5 billion transactions on Single’s Day

In addition to processing payments for third parties, Alibaba uses Alipay to process payments on its own platforms. During last year’s Single’s Day, Alipay processed 1.5 billion transactions for Alibaba. Single’s Day, which falls on November 11, is Alibaba’s biggest annual shopping event. Alibaba’s 2017 Single’s Day gross sales rose 39% to $25.9 billion. JD.com (JD), which competes with Alibaba for Single’s Day budgets, made $19.1 billion in gross sales on Single’s Day last year, representing an increase of 50%.

Could there be a strategy to sideline Alibaba?

Walmart and Tencent are investors in JD.com. If the decision by Walmart to drop Alipay in some of its stores in China is part of a strategy to sideline Alibaba as competition in China’s e-commerce space and the digital payment market heats up, Alibaba could be up for a big challenge.

With a 54% share, Alibaba’s Alipay currently dominates China’s mobile payment market, according to iResearch China. However, rivals such as WeChat Pay, which is underpinned by Tencent’s Tenpay technology, are steadily closing in on Alipay.

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