Alipay and WeChat Pay are conquering the world of Chinese tourism payments at the expense of cash and, perhaps most notably, UnionPay. In their battle to become the dominant mobile payments platform at home, Alibaba and Tencent have directed significant efforts toward becoming the payment method of choice for China’s outbound travelers. On average, more affluent than the typical Chinese consumer, becoming the platform of choice for these traveling consumers is key.
Of course, the infrastructure used to support payments made by Chinese tourists could also be repurposed to roll out Alipay and WeChat Pay payments in a foreign market—for foreign customers—when the time is right. Nonetheless, the primary target of these international expansions remains Chinese tourists. Now, however, Chinese mobile payment solutions are being used to facilitate tax evasion by Chinese-owned stores.
In Vietnam, Chinese mobile payments are now being highlighted as part of the so-called zero-dollar tour problem and related criminal activities that many Southeast Asian countries in China’s periphery have been struggling with.
With zero-dollar tours, tours are offered to Chinese consumers at extremely low prices, with costs recouped from things like “forced shopping” at partnering stores in foreign destinations. Such tours have also been found to produce next to no revenue for the receiving countries as virtually every part of the journey is controlled by Chinese companies or associates and little or no benefit is derived by local tourism stakeholders.
In Vietnam, Chinese mobile payments are now being alleged as part of such exploitative practices, with Chinese POS terminals being used to process payments by Chinese tourists—in other words, bypassing Alibaba and Tencent’s local partners entirely. With Chinese tourists’ payments processed in Chinese renminbi using Chinese POS terminals, Vietnam not only loses out on the ability to collect taxes but is also unable to understand the extent of Chinese consumption in the country.
“Recently, there have been a number of Chinese-owned businesses using POS payment machines or e-wallets issued in China to receive RMB payment from Chinese tourists while trading in the territory of Vietnam. This is a serious breach of Vietnam laws. Due to prices listed and payment accepted in foreign currency in the territory of Vietnam, it has caused direct money flows from buyers’ bank cards or e-wallets to that of the sellers in the China territory only without flowing into Vietnam, and has resulted in unmanageable transactions as well as tax losses,” said VIMO’s CEO Do Cong Dien in a Fintech Innovation report. VIMO is a local partner of both Alipay and WeChat Pay in Vietnam.
Dien encourages Chinese tourists to make sure that the stores they’re shopping in are offering legal Alipay and WeChat Pay transactions— but that may be easier said than done when dealing with a payment method that is designed to be fast and seamless.
One thing is for certain: the zero-dollar tour problem is far from solved in Southeast Asia, and new technologies like Chinese mobile payments may be making conducting such criminal activities easier than ever. Unlike cold hard cash, mobile payments don’t need to cross any physical borders. Unfortunately for Tencent and Ant Financial, they may need to take steps to stop users from utilizing their platforms to break foreign laws, a task easier said than done.