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Tencent-Walmart Deal Means a Loss for Alibaba

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WeChat and Alipay support online and offline payments

In selecting Tencent (TCEHY) as its preferred mobile payment provider in western China, Walmart (WMT) made a bold move against competitor Alibaba (BABA). Until Walmart changed its mind to accept Tencent’s WeChat Pay in all its stores in China’s western region, Alibaba’s Alipay had been its payment partner in all its more than 400 stores across China.

Walmart hopes to partner with more payment providers in China as it works to improve the customer experience by offering more convenience and simplifying the checkout process. WeChat Pay and Alipay support both online and in-store payments.

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Another blow to Alibaba’s finance unit

For Alibaba, being dropped by Walmart in western China seems to be another blow to its finance business. In January, the US government blocked Alibaba’s Ant Financial from acquiring MoneyGram (MGI). Ant Financial, which runs the Alipay service, hoped to tap into MoneyGram’s global money remittance network to accelerate its penetration of overseas markets. In addition to payments, Ant Financial’s financial services include credit and fund management.

For Tencent, winning Walmart’s payment business in western China could be viewed as revenge against Alibaba. Tencent was Starbucks’s (SBUX) preferred mobile payment provider for a long time before the coffee chain began accepting Alipay as well last year.

Alipay leads, but competition is closing in

According to iResearch China, Alipay currently dominates China’s mobile payment market, but rivals such as WeChat Pay are gradually cutting its lead. Being dropped by partners such as Walmart and failing to close the acquisition of MoneyGram haven’t made things easier for Alipay and its parent Ant Financial.

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