Chinese Web Giant Tencent Cuts Transaction Fees For SMEs On WeChat

Chinese web giant Tencent has reduced transaction fees for small and medium-sized enterprises using its WeChat payment system by 10%, the company announced on Thursday.

The move is a “proactive answer” to the government’s call on lowering operational costs for SMEs as well as individual merchants, Tencent wrote in its announcement, that was also published via WeChat. It started in September 2021, and will continue until September 2024.

The fee reduction applies to all companies classified as SMEs by China’s Ministry of Industry and Information Technology. Individual merchants approved and recognized by regulators will also benefit, according to the announcement.

Tencent’s decision follows a series of fee cuts made by China’s large internet corporations. To tide pandemic-hit merchants over and assist with the country’s economic recovery, China’s state planner, the National Development and Reform Commission(NDRC), published two weeks ago new guidelines asking food-delivery platforms to cut fees so as to reduce restaurants’ operational costs.

Ele.me, the food-delivery platform under Chinese e-commerce giant Alibaba, said on Wednesday it will refund 20 million yuan ($3.2 million) in commission fees back to the accounts of restaurants in 87 counties and districts most affected by the pandemic in January and February, according to a post published via its official WeChat account.

The announcement came just one day after its larger competitor Meituan launched similar merchant support measures. Run by Chinese billionaire Wang Xing, Meituan decided to cap its commission fees at 5% of sales generated via the company for about one million merchants most affected by the pandemic. The company, in addition, will cap such fees at 1 yuan ($0.16) for small and medium-sized merchants in the country’s lock-down areas until business returns to normal. It has also pledged to issue additional subsidies to merchants facing extra difficulties.

“We hope to get through this hard time together with our merchants hit by the pandemic and running into operational difficulties, ” Meituan wrote in a Tuesday announcement made also via WeChat.

But regulator’s desire to help restaurants and smaller merchants has initially spooked markets. NDRC’s guideline once sent Meituan’s shares tumbling as much as 15%, wiping out $26 billion in market cap in one day as investors worry it heralds new regulations aimed at further reining in the country’s already battered tech giants. Meituan, which offers a plethora of local services including grocery shopping and hotel booking, relies on food delivery for more than half of sales.

It was fined last October $534 million for violating the country’s anti-trust laws, including pressuring restaurants to sell exclusively on its platforms. The punishment, together with higher marketing costs and investment in newer businesses such as grocery shopping, led Meituan to report a loss of 10 billion yuan($1.6 billion) for the September quarter, reversing from net income of $1.1 billion the same period a year ago. Its total revenues grew 38% to $7.7 billion in that quarter, but the company lowered its outlook for its core food-delivery services due to Covid-19 lockdowns and China’s slowing economic growth. 

And Meituan used to charge commission rates, which is also called technology service fees, between 10% to 20% of each order generated via its food delivery platform. Catering vendors pay additional fees for delivering meal orders via Meituan’s fleet of couriers, but they can also use other options such as delivering on their own.

Ele.me employs a similar mechanism, and it is part of Alibaba’s local consumer services business unit that also includes the likes of grocery shopping and travel booking. Such a unit generated $1.9 billion in sales during the September quarter, or about 5% of the e-commerce giant’s total revenues for the period.