Didi Chuxing, China’s largest ride-hailing platform, is beginning its expansion abroad and into new sectors. Didi has already pushed out foreign competition from Uber in China and now seeks to leverage its dominance in the domestic ride-hailing market to open up opportunities in Taiwan and the fast-growing mobile payments market. The key overlap between these two ventures is Chinese tourism.
Taiwan is perhaps the best test market for Didi’s global roll out
Didi will be using a franchise model in Taiwan and is currently recruiting local taxi drivers. The company was able to raise $5.5 billion in funding to fuel its global expansion. While Taiwan is a relatively popular tourist destination for Chinese tourists with almost 3 million Chinese arrivals in 2016, the tiny island nation off the coast of China is still dwarfed in terms of Chinese arrivals compared to destinations like Vietnam and Thailand.
Taiwan is likely serving as a test market for Didi to get a solid grasp on an international strategy in a market without language barriers. It’s possible that the firm intends to encourage adoption among Taiwanese consumers, but in the short term, it’s likely banking on use by Chinese tourists who are already familiar with the platform. This will prove especially important in markets with even larger numbers of Chinese arrivals.
There is currently no timeline for a rollout of the service in Taiwan and Didi hasn’t applied for the proper permits at the Taiwanese transportation ministry.
Didi’s global expansion and foray into mobile payments is clearly centered around Chinese tourism
Didi has picked up a license for establishing its own mobile payments service according to the People’s Bank of China (PBOC). PBOC has controlled the issuing of mobile payments licenses since last year.
With bank approval, Didi purchased the mobile payments provider 19Pay through its subsidiary Shanghai Shiyuan Technology for $45.4 million. Currently, Didi handles 20 million ride-hailing transactions a day. Implementing its own mobile payments platform could keep more of this revenue within the company.
With plans to expand in Taiwan to target Chinese tourists, its clear that Didi has picked up on what now competitors Alipay and WeChat Pay already know: success in the mobile payments market means being available for the Chinese consumer at all times, even while abroad.
Both Alipay and WeChat Pay have made expanding into Europe, Asia, and North American clear priorities. However, they have made little effort to encourage adoption in those markets. Rather, global expansion has been all about facilitating the spending of Chinese tourists.
To compete effectively, Didi must carve out a clear niche for its mobile payments platform
With both a transportation and payments platform, Didi could position itself as more integral to the Chinese tourist for both purchases and in-destination transportation, which could prove lucrative and ideally encourage adoption at home. However, Alipay and WeChat pay have their competitive edges. Alipay is already well integrated with Alibaba’s e-commerce platforms like Alibaba.com and Taobao. WeChat Pay is also advantaged by integration with China’s most popular social media and messaging application, WeChat.
To compete effectively with these two juggernauts in the short-term, carving out a clear niche that its payment service can excel and tourists might be the best bet.