You simply cannot do business in China nowadays without a WeChat account. Owned by Tencent Group, the social media platform and its associated WeChat Pay service are ubiquitous in China with rapid expansion internationally too.
So how then did a Sydney-based company score a lucrative deal to expand WeChat Pay in South East Asia? We catch up with Invigor (ASX: IVO) CEO Gary Cohen who explains the deal and why Aussie businesses need to harness the platform with Chinese vistors and tourists.
While still very much a penny stock (actually it's worth even less than a penny) at the time of writing, Invigor's share price has risen 133% since it announced a groundbreaking deal earlier this week with Tencent partner Winning Group to enhance WeChat services in key South East Asian markets.
As a data and analytics solutions business, Invigor will now be aiding the expansion of a service that already has more than a billion users, which for the uninitiated is something like a cross between Facebook, Whatsapp, Twitter and Apple Pay that Chinese citizens use for so many facets of everyday life.
"WeChat has an amazing ability to be a platform upon which many programs are being written and from which you can not only have a social-type program for chats, but you can then engage and share data with other people on that platform," says Cohen (pictured below).
"In China credit cards are not as strong as they are in many of our markets and accordingly, most people use WeChat Pay.
"You can see the prevalence of it. What it does is real-time payments; each person can be like an ATM because WeChat basically facilitates that in a secure and instantaneous way."
So how did a little-known group like Invigor come to get involved with such a monster of a business?
After leading health care IT company iSoft to be sold to DXC Technology for $400 million in 2011, Cohen and his younger brother Gregory were on the hunt for new investments. The goal was to stay in the IT space with exposure to trends around mobility with pricing and market intelligence data.
"Ultimately we acquired a loyalty solution that was being run out of Singapore by a group of Australians that had set up a business there with an Asian market focus," he says.
"What we have been doing is not only building up our expertise for retail and the brand market, but we've also been building our solution and our technology to focus on driving that in those markets."
Prior to the 36-month Memorandum of Understanding (MoU) with Winning Group, Invigor was already working with large retailers in Australia and abroad. Groups using its services include Sharp, Hitachi, the Good Guys, Pernod Ricard and Moët & Chandon.
"We've got major brands that use our solution, and recently some major fintech groups and banking groups are reviewing the use of our solution," says Cohen.
"What we realised is our solution was very applicable to parties that were dealing with multiple merchants, or omni-channels.
"So when you've got this capability where we've got a lot of unique skillsets with dealing with that capability, it was in that feature that the WeChat Pay group and Winning Group in particular realised that our expertise and capability to help them grow the business outside China was going to be exceptionally valuable."
Cohen says the plan is to focus on the Singapore and Hong Kong markets initially, before expanding elsewhere in the region. This arrangement does not contemplate working in Australia, but we asked the executive what potential WeChat might have here.
"In Australia there are one or two parties that have the right to distribute WeChat. The first thing that WeChat does is enables Chinese visitors to use local currency from China to pay for local goods and services in the foreign country," he says.
"WeChat will basically reimburse the Australian retailer with Australian currency and deduct the goods and services charge from their Chinese account.
"The ability to transact up to a certain limit each day while these visitors are travelling is very powerful, because that's how they can do it without taking money out of China in a legal and legitimate way."
But how widespread is the platform in Australia?
"Very limited. I think two or three of the major retail stores have it. But amongst the Chinese community, most of the Chinese community who communicate with their family in China all use WeChat," he says.
This is mostly with the social media aspect of WeChat at this stage.
"At the moment it's quite limited in terms of purchasing [outside China]. They've recently expanded into Hong Kong, Japan and I believe Malaysia recently launched a series of WeChat accounts," he says.
"In the last year I think the number of WeChat users in Malaysia has grown something like 20 million in the space of one year. Notwithstanding the very substantial cultural differences between the Malaysian and the Chinese market - even though there are a large number of Chinese who are living in Malaysia - the use of this technology and platform is being adopted and picked up with amazing speed.
"I'm not saying this is going to be the bee's knees for the Australian market, and the Australian market is going to take time."Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
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