China's mobile payment war escalates

HANGZHOU - In the war between Tencent and Alibaba for China's emerging mobile payment market, cab-calling services have become the slightly unexpected battlefield.

Smartphone apps Didi (Tencent) and KuaiDi (Alibaba) are competing for the custom of those Chinese people who hail a cab through their online services.

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Didi announced on Tuesday that if passengers pay the taxi fare via WeChat (Tencent), they will get a 12 yuan price subsidy. Hours later, rival KuaiDi made a public promise to cut "always one yuan more than our competitor" off the price, if the payment goes through Alipay.

In large cities like Beijing, a three kilometer taxi ride could be free, as the starting fare is 13 yuan. In smaller cities where starting fares are less, consumers may even profit.

As the competition gets more tigerish, the sustainability of the price war has come into question and a more healthy development of the mobile payment market sought.

Alipay currently leads mobile payments with nearly 300 million registered users, 100 million of whom use mobile phones.

Last year, those users made 2.78 billion transactions, with an aggregate turnover of 900 billion yuan, more than five times the $27 billion posted by Paypal in the same period.

Neck and neck is Tencent's WeChat, China's largest social networking app with more than 500 million users worldwide.

During Spring Festival holiday between January 31 and February 6, WeChat users on the Chinese mainland distributed nearly 200 million yuan of "lucky money" to one another through the platform. That marketing maneuver has given Wechat an edge as users scramble to cash in their gifts that have to link at least one cash card.

Describing the lucky money maneuver as a "surprise attack on Pearl Harbor", Alibaba Chairman Ma Yun said, "It's a good thing Spring Festival ends soon."

While the skirmishes escalate, researcher Yi Jingxue with Analysys International sees "no clear profit model for cab-hailing apps yet."

"The real emphasis of the rivalry should go beyond looking for new users to cultivating user loyalty," said Yi.

"For mobile Internet products, network traffic means profits, which is why the number of users is of ultimate importance," Yi explained.

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Videographic: the battle of the taxi apps