Chinese web giant Tencent cuts transaction fees for SMBs on WeChat

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

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

The tax reduction applies to all companies classified as SMEs by the Chinese Ministry of Industry and Information Technology. Individual traders licensed and recognized by regulators will also benefit, according to the announcement.

Tencent’s move follows a series of fee reductions by major Chinese internet companies. To help out traders affected by the pandemic and help 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 reduce fees to reduce operational costs for restaurants.

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

The announcement came just a day after its biggest competitor Meituan launched similar measures to support traders. Led by Chinese billionaire Wang Xing, Meituan decided to cap its commissions at 5% of sales generated through the company for around one million merchants most affected by the pandemic. The company, furthermore, will cap such fees at 1 yuan ($0.16) for small and medium merchants in closed areas nationwide until business returns to normal. It has also pledged to provide additional subsidies to traders facing additional hardship.

“We hope to get through this difficult time with our merchants impacted by the pandemic and experiencing operational difficulties,” Meituan wrote in an announcement Tuesday also via WeChat.

But the regulator’s desire to help restaurants and small traders initially spooked the markets. The NDRC directive has already sent Meituan shares tumbling by up to 15%, wiping out $26 billion in market capitalization in one day as investors fear it will announce new regulations aimed at further curbing the giants of the country’s already beaten technology. Meituan, which offers a plethora of local services including grocery shopping and hotel reservations, depends on food delivery for more than half of sales.

It was fined $534 million last October for violating the country’s antitrust laws, including pressuring restaurants to sell exclusively on its platforms. The sanction, coupled with higher marketing costs and investment in new businesses such as groceries, led Meituan to report a loss of 10 billion yuan ($1.6 billion) for the September quarter, compared with a net profit of $1.1 billion in the same period a year ago. Its total revenue rose 38% to $7.7 billion this quarter, but the company downgraded its outlook for its core food delivery services due to Covid-19 lockdowns and the slowing economic growth in China.

And Meituan used to load commission rates, also known as technology service fees, between 10% and 20% of each order generated through its food delivery platform. Catering providers pay extra for delivering meal orders via Meituan’s courier fleet, but they can also use other options such as self-delivery.

Ele.me uses a similar mechanism and is part of Alibaba’s local consumer services business unit, which also includes businesses such as groceries and travel booking. Such a unit generated $1.9 billion in sales in the September quarter, or about 5% of the e-commerce giant’s total revenue for the period.

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