TMTPOST--Alibaba, the Chinese e-commerce giant, confirmed on Thursday its plan to integrate WeChat Pay, tech giant Tencent's digital payment service, into its e-commerce platforms Taobao and Tmall, signaling the end of a decade-long rivalry between two of China's largest internet companies.

Taobao and Tmall made the announcement on Wednesday, seeking public feedback on allowing payments through WeChat Pay, as a part of a broader push to improve the shopping experience for consumers.

While the new payment option is not yet available on the Taobao website, a customer service representative disclosed that merchants are gradually being invited to add WeChat Pay, and the service will roll out to more online stores over time.

This development marks another step toward tearing down the "garden fence" that China's tech giants had created around their platforms, as Chinese authorities crack down on monopolistic behavior in the digital space.

For over ten years, shoppers on Taobao and Tmall had limited payment options, relying primarily on Alipay, owned by Alibaba's affiliate Ant Group. The exclusion of WeChat Pay helped Alipay maintain a strong lead in China's digital wallet market.

Alipay showed a positive attitude in the announcement that could challenge its dominance within the Alibaba ecosystem, emphasizing its commitment to an open internet.

"We believe in fostering an open ecosystem that supports innovation, and we will continue to collaborate with Taobao and Tmall to drive technological progress," Alipay said in a statement on Wednesday.

The news quickly became the top trending topic on Weibo, where many users praised the decision. One popular influencer with over 3 million followers commented, "It's a smart move, no more hassle of transferring funds back and forth."

Previously, WeChat Pay users are charged a 0.1% fee each time they transferred funds from their wallets.

For years, Alibaba and Tencent have engaged in fierce competition, restricting each other's platforms. After Tencent launched WeChat Pay in 2013, Alibaba chose not to integrate it, despite its massive user base. Tencent retaliated by limiting Taobao store ads on WeChat. Both companies cited platform security and user experience as reasons for these actions.

However, increasing government pressure on tech firms to break down these barriers has led to significant changes. In 2021, China's Ministry of Industry and Information Technology called for platform interconnectivity, and WeChat soon stopped blocking Taobao store links. The government further intensified its efforts in 2024, with new regulations against unfair online competition taking effect on September 1.

According to a report by Morgan Stanley, hundreds of millions of WeChat Pay users, mainly in lower-tier cities, are not Alipay users.

For WeChat Pay, integrating with Taobao offers an opportunity to solidify its market share, increase commission revenue, and improve overall performance. However, industry insiders have also raised concerns that WeChat Pay, which already holds a dominant market position, could face increased antitrust scrutiny if its market share grows further.

Despite these potential benefits, there are challenges as well. A payment company founder told AsianFin that while the technical integration between the two platforms is not overly complex, it involves a substantial amount of work.

Additionally, if the anticipated benefits fail to materialize, the downside risk could be significant. "Payments provide the most accurate data on transactions and traffic, and if other companies gain insight into your business activities, it could become a threat," the founder noted.

E-commerce professionals also expressed concerns to AsianFin, pointing out that in the current e-commerce landscape, the key competitive factor is traffic, not payment methods.

Taobao is under greater pressure now than it was 11 years ago. At its peak in 2017, Taobao held a market share of 72.1% based on GMV, with JD.com accounting for 20.8%. By 2024, Taobao's estimated market share had dropped to 33.1%, with Pinduoduo at 18.9%, Douyin at 18.3%, and JD.com slipping to 16.9%.

While Alipay may appear to be the biggest casualty in this "fence demolition," the reality might be different. According to Ant Group's 2020 IPO prospectus, Alipay processed a total payment volume of 118 trillion yuan annually, while Taobao and Tmall's GMV during the same period was around 7 trillion yuan. This means that payments from Taobao accounted for only about 6% of Alipay's annual total.

On the same day that Taobao announced the full integration of WeChat Pay, Meituan's food delivery and hotel services also announced their entry into Alipay's mini-program ecosystem, with Meituan's group buying services currently in testing. Now, users can order food through Alipay, no longer limited to Ele.me as their only option. While Alipay remains folded within Meituan's payment options, this situation may change in the future.