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    WeChat Pay Service Fee Triggers Backlash and University Bans

    While the introduction of new service fees by WeChat Pay sparked widespread debate, the company apologized and said it was a “communication blunder.”

    Days after several universities across China announced the suspension of WeChat Pay services following a hike in commission for the payment service on campus, WeChat’s parent company Tencent has issued an apology and announced steps to address the mounting backlash. 

    Over the past week, more than 10 universities across four provinces announced the suspension of WeChat Pay on campus due to the increased service fees the company began charging this month. 

    In contrast, WeChat Pay’s main competitor, Alipay, doesn’t charge universities commission for the same transactions. 

    On June 26, the Nanjing University of Science and Technology in the eastern Jiangsu province was the first to cut all ties, claiming the payment service platform had started charging merchants on the campus commission of 0.2% for each transaction, with the exception of tuition-related payments.

    Zhoukou Normal University in the central Henan province issued a similar ban on WeChat Pay Thursday, saying students could still use their school ID cards, credit cards, and other mobile payment methods. 

    The university alleged WeChat Pay charged commission of as high as 0.6%, and that it decided to stop access to the service after negotiations with the company failed.

    With the suspension of WeChat Pay services sparking widespread debate on social media, Tencent apologized, citing a communication blunder and later said that the service fee was adjusted to 0.2% and only applied to “profit-making scenarios” on campus. 

    Commission has been exempted for the payment of tuition fees, the company said, as were other “non-profit” transactions since 2015. 

    “We observed that with the increasing number of merchants on campus, certain profit-making services such as e-commerce and hotel businesses have been taking advantage of our subsidy resources,” stated the company. 

    Tencent further explained that this “exploitation” has resulted in rising operational costs and expenses incurred in transactions with banks and other liquidation agencies. Generally, WeChat Pay applies commission of 0.6% to the majority of merchants, as stated on its official website.

    No commission would be charged to businesses run by colleges, the company clarified. Some universities, such as Northwest University and Zhengzhou University of Aeronautics, have since rolled back the ban following the company’s response.

    China has seen a fast-growing adoption of mobile payments over the past decade, and the number of people using online payments exceeded 900 million in 2021. The industry is highly consolidated, with two dominant players — Tencent and Alibaba — taking up 90% of the market share, according to domestic consultancy iiMedia.

    Wang Pengbo, a senior financial analyst with domestic consulting firm BoTong Analysys, told domestic outlet Caijing that the increase of commission on campus is indicative of the mounting pressure on Tencent to generate profits from its business. 

    Wang pointed out that the company’s statement lacks clarity and questioned whether the increased commission could be justified by increased financial costs, especially considering that the company has enjoyed preferential policies in its payment arrangements with banks.

    This isn’t the first time that the mobile payment giant has sought additional service fees for transactions after initially offering the service for free to attract users. 

    Starting in 2016, the company implemented a commission of 0.1% for users when transferring money from WeChat Pay into their bank accounts. In 2018, the same commission rate was applied to users who utilized the service to pay off credit card debts. Additionally, the company introduced an exemption tied to membership in its wealth management apps.

    These practices have sparked controversy, leading Zhu Lieyu, a delegate from the National People’s Congress, China’s top legislature, to propose a reduction in commissions for both merchants and users. In 2021, Zhu argued that the company has abused its market dominance and that the excessive charges constitute an unfair and dishonest practice.

    Editor: Apurva. 

    (Header image: VCG)