Forest Lin, corporate vice president at Tencent and concurrently president at Tencent Financial Technology, shares his insights on the impacts of the pandemic on the company, the recent strategic initiatives as well as the outlook for 2021
Chinese technology conglomerate Tencent operates across multiple verticals in internet services including social networking, e-commerce, online games, fintech, business services and technology solutions. Its communication and social platforms, QQ and WeChat (Weixin in China), have 617 million and 1.2 billion users, respectively. Lin oversees the company’s fintech business that includes payment, wealth management, securities and other services.
The COVID-19 pandemic accelerated digitisation and brought a rapid shift from offline to online purchases. The cross-border travel and activities were restricted resulting in unique challenges and opportunities for businesses. Lin said the mobile payment volumes from offline activities dropped in the first quarter of 2020 but increased after showing signs of recovery. Meanwhile the cross-border remittance and commercial payments have grown rapidly during the pandemic.
“The need for remittance services from Hong Kong to the Philippines and Indonesia via WeChat Pay HK has been constantly increasing,” Lin said.
Tencent introduced a new platform, WiseFX, to provide enhanced cross-border payment and foreign currency services to corporates.
Lin explains that the increase in commercial payment and wealth management contributed to the growth of fintech services last year. In the quarter ending September 2020 Tencent earned revenue of RMB125.4 billion ($18.4 billion) an increase of 29% year-on-year (YoY), while the revenue from fintech business services increased by 24%. Tencent’s total payment volume increased by 30% while the wealth management clients and aggregated customer assets increased by 50% YoY.
Lin comments that, “Greater access to global markets and the cross-border trade and consumption will continue to be an important driver of global growth in the recovery from COVID-19”.
The following is the edited transcript of the interview:
Neeti Aggarwal (NA): How did the COVID-19 pandemic impact your fintech business? What are the key challenges?
Mobile payment volumes dropped in the first quarter of 2020 due to the pandemic
Forest Lin (FL): Like many companies, Tencent Fintech was affected by this and the first concern was to protect the employees. The company has taken a proactive, employees-first approach to ensure that the spread of COVID-19 is mitigated and the disruption to business operations is kept at a minimum.
As a global technology company, Tencent understands its role in the global fight against the pandemic. Tencent announced the anti-pandemic funds in China and internationally of over $300 million for the purchase of personal protective equipment for frontline workers and other essential medical supplies. The funds were allocated to provide technological support to combat the pandemic and to fund the research on medical treatment.
From late January to early February 2020, our mobile payment volume on Weixin Pay went down because of the movement restriction and stay-at-home order. A lot of mobile payments are used in offline activities. But soon after the restrictions were lifted, the volume came back very quickly. At the end of March and early April, the average daily commercial transaction volume has returned to the level at the end of 2019. Now it is back to very solid YoY growth in terms of mobile payment volume.
NA: What will be the most significant changes in the fintech industry landscape post-pandemic?
Demand for cross-border commerce payments and remittance surged in 2020
FL: The closing of physical borders has not only led to the demand for better connectivity to perform overseas trades during the pandemic. The level of cross-border online commerce activity has also increased rapidly. To fulfil the surge in demand in cross-border commerce-related payment transactions, Tencent introduced the WiseFX platform to provide diverse and enhanced payment and foreign currency services solutions to corporate clients. Cross-border online commerce activities will continue to be an important driver of global growth in the recovery from COVID-19 this year and beyond.
We have also seen the demand for remittance services increase given that cross-border travel has nearly been brought to a standstill, making offline transactions difficult because of the pandemic. Online remittance services are especially important to people who work overseas to provide financial support to their families back home.
WeRemit, our remittance service was introduced to improve cross-border remittance efficiency and it has grown rapidly during the pandemic. The need for remittance services from Hong Kong to the Philippines and Indonesia via WeChat Pay HK have been constantly increasing. We also realise that we need to expand scenarios to solve cross-border remittance problems for more users as we believe in bringing real value and solving problems are at the heart of what we do.
NA: What are the features of the WiseFX platform and how was the market adoption and growth since its launch last year?
FL: WiseFX is a brand-new product that aims to help corporate merchants especially mainland Chinese businesses facilitate cross-border remittance in foreign currencies.
Fintech business witnessed an increase in payments and wealth management services
NA: Tencent’s revenue from fintech and business services increased by 30% in the second quarter and 24% in the third quarter of 2020. What are the factors driving this growth and the key initiatives needed in the financial industry?
FL: Our commercial payment volume rebounded quickly once people resumed work in China. Online transaction growth benefited from an accelerated shift from offline to online purchases due to the pandemic as well as greater usage of Weixin Mini Programmes for transactions in categories such as groceries and apparel.
The pandemic has no doubt forced rapid acceleration in the adoption of digital financial services. One significant change in user behaviour is the growing demand for wealth management and related advisory services. For our wealth management business, aggregated customer assets and the number of active customers rose rapidly YoY as more customers came to appreciate the convenience of managing their cash through our secure and well-curated platform.
People are looking to protect and grow their assets in a time of tremendous uncertainty and this is where we can play a role to help support them in establishing and improving their financial security. There is much work to do when it comes to investor education and offering a full range of products to satisfy investor’s needs. These will be the focus areas to be addressed in the future.
Cross-border trade and consumption will be key drivers of global growth to achieve a sustainable recovery from the impacts of COVID-19
NA: How are you prioritising your technology infrastructure investments to become more resilient and enable greater industry collaboration?
FL: When it comes to financial technology, trust is critical to capitalising on opportunities and entering new markets. Tencent adheres to global best practices on user privacy, data security and transparency. Tencent works with local partners and merchants in compliance with the laws and regulations in all the markets we operate. We work with authorities on anti-money laundering measures. We ensure that we have the right technology, processes and culture in place.
NA: What is your outlook for 2021and the key innovations and technologies that you plan to invest this year?
FL: 2020 has been an extraordinary year. International travel was ceased. Consumers want greater access to global markets and that cross-border trade and consumption will continue to be an important driver of global growth in the recovery from COVID-19. This is a tremendous opportunity for a financial institution to add value to inclusive finance. Tencent Fintech is committed to help remove the frictions in international trade and globalisation as the need for financial interconnectedness will continue to grow.