Chinese internet groups see taxi apps as driver for growth

January 29, 2014 6:27 pm

Chinese internet groups see taxi apps as driver for growth

By Sarah Mishkin in San Francisco

Two of China’s biggest internet companies –Alibaba and Tencent – are fighting a proxy war over the lucrative mobile payments market by backing rival taxi-hailing apps.

Alibaba has invested in Kuaidi Dache (“Fast Taxi”), while Hong Kong-listed Tencent, the company behind chat app WeChat, backs Didi Dache, whose name translates to “Beep Beep Call a Cab”. Taxi apps have become massively popular in China, where traffic congestion on some routes in its sprawling megacities can be so bad that taxi drivers refuse fares to those areas. Tencent and Alibaba executives see an opportunity to use apps that ease rush-hour pain to expand their respective payment networks.

“Cab drivers have been telling me to pay via WeChat, because it now rewards drivers and passengers Rmb10 on each ride,” says Sam Sun, a media professional.

Mobile internet payments in China nearly quadrupled between the first half of 2012 and 2013 to Rmb130bn, according to research consultant iResearch.

Alibaba, whose much-anticipated IPO this year could value it at more than $60bn, is facing slowing growth in its core ecommerce business, according to financial details revealed on Tuesday by its major shareholderYahoo


The Chinese group is hoping that its PayPal-like Alipay unit could become a new driver of growth. Since last week, Alipay users have been able to book and pay for cabs in over 40 cities through the Kuaidi Dache app. Alipay is also seeking ways to let Chinese travellers buy airline tickets and pay for food at Chinese restaurants in the US, according to a spokeswoman.

“They are trying to get as many users as possible comfortable using [mobile payments] . . . on a regular daily basis,” says Mark Natkin of Marbridge Consulting in Beijing.

But it is far from clear that Alibaba will be able to dominate mobile payments in the same way as it has done in ecommerce – Alibaba’s various sites host about 80 per cent of China’s ecommerce and sales on those platforms comprise about 2 per cent of China’s gross domestic product.

The biggest obstacle to Alibaba’s ambitions is Tencent, which has a market capitalisation of $100bn. It has added a feature to WeChat that lets the nearly 300m monthly users book and pay for cabs on Didi Dache.

Both Didi and Kuaidi, which also compete with a number of other Chinese taxi apps, have been marketing their service aggressively. “I tend to choose Kuaidi as Alipay is more convenient,” said Wang Chen, a finance worker in Beijing.

Alipay has a market-leading 50 per cent share of online payments in China, against Tencent’s 20 per cent, but WeChat’s big user base makes it a formidable challenger. Already, WeChat has drawn users away from Sina Weibo, a microblog in which Alibaba has a minority stake.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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