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Chinafied: Tencent Backed Company “Innovates” Square’s Card Reader

This article is a translation of the article that was originally posted on the Chinese version of mobiSights.

As we saw during the GMIC Roadshow, the Square model is becoming popular. According to the last publicly disclosed transaction data of Square, its average daily trading volume has exceeded $ 11 million USD.  The spotlight on this company from both domestic and foreign media has, of course, lured Chinese Internet players to the model.  Thus, iBOXpay, QFpay, and other similar products have been emerging.

Although these companies are favored by the press and investors, the lack of regulations for this kind of business (is it POS acquirer or Internet payment?) and the expected payment licensing issues have forced them into a predicament: they are ambitious to become more than a mere hardware or software providers, but they are unable to operate independently.

The first Square-like company that officially released its product was one that has had little media coverage – Yeahka. To our surprise, just a week ago, this company launched a New Year group purchase in the name of Tencent’s “TenPay card reader.” Tencent attendance will undoubtedly make the game a little more subtle, and people cannot help but wonder its strategies on the entire ecological chain. It seems that a war of mobile payment has quietly started.

Yeahka “TenPay card reader” share almost the same solution with Square: a reader plugged into the phone’s audio jack. It even has similar shortcomings – unencrypted and one-way communication. But compared to the Square counterpart, Yeahka reader is a little bit flimsy. Some even doubt whether it will break when swiping cards. The 9.8 yuan card reader has affiliating applications that support iOS as well as Android smart phones and tablets. Users plug the reader into the audio jack, put a bank or credit card in, and follow the instructions to complete the payment. For more details please refer to the official video:

As we all know, mobile payment has a long industrial chain (businesses, individual users, payment service providers, telecom operators, banks / China UnionPay and other financial institutions and intermediary service carriers) with relatively unique resources. In the face of enormous market opportunities, the key to success is convenient access to the bank. With this access, the following steps are: mobile payment APIs available to developers, the rapid accumulation of downloads and pre-loaded phones, and entrance into app markets.

Yeahka seems to be following these steps.

It currently supports five banks and one online payment platform, namely Industrial and Commercial Bank, Construction Bank, China Merchants Bank, China CITIC Bank, and TenPay. The cooperation with TenPay sure deserves more attention. Via Yeahka’s solution, users can pay phone bills, TenPay and game fees, as well as TenPay orders.

However, this is far from enough since most e-commerce platforms are based on China UnionPay or Alipay. From the user perspective, this only option is bound to hinder the customers from using Yeahka devices when they are used to CUP or Alipay. After all, the convenience a mobile payment device should have will be greatly reduced if it is not available on popular shopping platforms such as Taobao.

Although people have doubts about this, Yeahka seemed quite resolute. Perhaps, hidden behind this exclusive cooperation is the support and long-term strategic considerations from Tencent, as well as enormous possibilities generated from the integration of this emerging mobile payment method and various Tencent platforms. Tencent has far-reaching plans for the mobile Internet market, and this “last mile” payment is definitely of decisive significance. From the Yeahka perspective, since most transaction volume of Alipay is from Taobao, TenPay could certainly compete in the third-party payment market.

With more than 700 million Internet users and more extensive product lines, Tencent may be a wiser choice.

[UPDATE]:

After this article was posted, many followers who know more about the background have replied and offered further information:

Yeahka is more than related to Tencent – it is backed by a team of former TenPay employees.  So it makes sense for Yeahka to cooperate with TenPay instead of Alipay.

Bank cards are upgrading from magnetic stripe to IC and other non-contact technologies.

Cooperation with Tencent is an attempt to help alleviate some of the risk that potential governmental regulations pose to Yeahka. This attempt, if successful, will be an encouragement for start-up companies to do the same in the future.

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