Tencent Holdings Ltd (OTCMKTS:TCEHY) is ramping up its push for market share in the payments business with the launch of a new credit scoring system. The new system is designed to measure the trustworthiness of consumers in addition to rivalling Alibaba Group Holding Ltd (NYSE:BABA)’s Sesame Credit, launched three years ago.
China’s Burgeoning Credit Scoring Business
Tencent is currently testing the credit scoring service among a small group of subscribers as it continues to build on its payments business. The service will expand the company’s footprint into a market that is 5 times the size of the U.S market.
Credit scoring is becoming a big deal in China given the lack of credit cards. Small businesses are relying on such services to rate the ability of people especially young shoppers to pay back any amount rent out. Aggressive promotion activities designed to encourage the use of other alternatives for making payments at the expense of cash also continues to fuel the demand for credit scoring services.
Tencent vs. Alibaba
Alibaba accounts for the lion’s share of the credit scoring space given that it was the first company to offer such services. Tencent entry into space should take competition to another level as the race for market share in the $5.5 trillion a year mobile payments market heats up.
Tencent has already signed up a number of scores of physical stores including Starbucks as it continues to take the fight to its fiercest rival
“Tencent obviously wants to change that, and they need to build up infrastructure to compete with Alipay’s more mature offering. Credit scoring is an essential part of that,” said Mathew Brennan China Channel Co-Founder
A launch of a credit scoring service comes at a time when Tencent is experiencing immense growth in its core business. The company has already provided a strong outlook for its hit game Honor of Kings as well as its advertising business. The stock has also rallied by more than 60% since the start of the year as the company continues to invest big on new opportunities for growth.
Tencent stock was up by 3.13% in Monday’s trading session to end the week at $41.8 a share.