WeChat App Update Could Mean Bad News For Apple

Here’s another headache for Apple, which is already dealing with weakening iPhone sales: Its hold on Chinese mobile consumers looks set to weaken, at least over the long term, thanks to an app update designed to make the WeChat app even stickier than it already is.

The app update is also about more than Apple — it’s just the latest step that a China-based payments and commerce provider is taking to expand its ecosystem as companies there battle it out to win loyalty from the country’s mobile-centric consumers.

The WeChat move — which at its core is just an app update, but one that will likely have deeper implications than most app updates — will have “serious ramifications” for Apple, according to what TuanAnh Nguyen, an analyst at technology research firm Canalys, told CNBC.

Mini Programs

Here’s what’s happening, according to that and other reports: WeChat owner Tencent is bringing what it views as a better user experience to WeChat by redesigning the placement and operations of “mini programs.” Those are basically apps within apps in the WeChat ecosystem, which can be thought of as digital boutiques that reside inside the WeChat app.

A PYMNTS story from last year described how they work, using Feelunique, an online retailer of cosmetics and other items, as an example.

To access the Feelunique mini program, a consumer navigates WeChat’s Discover column to the “mini programs” option, and then searches for Feelunique in the search bar before clicking to enter the store. “Browsing the mini program is just like browsing Feelunique’s Chinese web store,” a Feelunique spokesperson said. “You select the products you like, add them to the chart, and pay with WeChat Pay or pay with a debit card. Then the transaction is completed.”

The potential — and long-term — problem for Apple is this: The WeChat redesign will give users a second screen on the phones, a second screen for those mini programs. It can be thought of as a “second home screen,” according to a comment from Matthew Brennan, co-founder and managing director at consultancy China Channel, in that CNBC story.

Apple Service Business

That’s bad news for Apple’s Services business, which is becoming more important to the company as iPhone sales lose steam. That second screen could not only make it less appealing for Chinese consumers to leave the WeChat ecosystem, but the app update could also attract more developers to the WeChat world, as it is easier for developers, “who have limited resources,” to focus on a single app store or ecosystem, Canalys’ Nguyen told CNBC. WeChat, in short, could become a much more attractive option for the creative energies of developers.

And all that works against Apple and its efforts to keep people within its own ecosystem, according to observers and reports.

Chinese Mobile Ecosystems

WeChat boasts of having more than one billion monthly active users, and its recent moves show how it is building a larger ecosystem in the ongoing attempt to prevent consumers from bailing to go to rival companies and apps. Earlier this month, for instance, WeChat said it is now using a rating system to determine whether a user is eligible to receive perks, including deposit-free renting services. WeChat Payments Score soft-launched last November in eight cities, and the system is being tested out on certain apps, including Tencent-backed bank rental service Xiaodian, which will waive deposits for users if their rating hits a certain benchmark.

WeChat’s rival, Alibaba’s Ant Financial, has had a similar assessment system in place since 2015, which measures similar factors. People with higher scores enjoy perks like deposit waivers for hotel stays.

A broader look at the payments and commerce landscape in China shows that WeChat and its rivals are playing hard to capture more loyalty and revenue from consumers, including those Chinese consumers who increasingly travel abroad.

Take Alipay.

In Sweden, Wirecard has teamed up with Cimple Marketing in an effort to bring Alipay to Venue Retail Group stores, according to reports. With the offering, Wirecard noted that the retailer “will become an attractive shopping destination for Chinese visitors.” The collaboration comes as 12.4 million people from China traveled to Europe last year, and that figure could rise to 20.8 million when 2022 rolls around.

None of this, of course, means that Apple is doomed in China, even taking into account the company’s recent problems. It just means that WeChat and its rivals keep upping their game, and in the years to come, the moves taking place now — including that app update — could serve to take away market share from Apple.