The challenge

Tencent Financial Technology Group’s digital wallet service, WeChat Pay, has expanded rapidly into overseas markets to support the growing number of Chinese outbound tourists. As of August 2019, WeChat Pay is accepted by retail merchants in 62 markets outside of China. To further support its expansion plans, Tencent sought a comprehensive solution for its WeChat Pay service to improve the overall experience of both customers and merchants, as well as enhance internal processes to:

• Provide more competitive FX rates for Chinese e-Wallet users who pay in Chinese yuan (CNY) when making purchases in overseas markets.
• Improve the end-to-end payment flow for overseas merchants through better payment processing times and lower transaction fees.
• Use technology to enhance and automate internal treasury processes to create efficiencies.

The solution

The company partnered with J.P. Morgan to implement a comprehensive cash and FX solution via a three-pronged approach.

First, to provide more competitive rates for consumers, WeChat Pay tapped into J.P. Morgan’s ACCESS FX Merchant Solution (ACCESS FX) which supports the conversion of mobile payments in multiple currencies. Powered by an application programming interface (API), live FX rates are fed directly from J.P. Morgan into its system so buyers purchasing goods in overseas markets can make payments in their local currencies. The solution also comes with the added option for WeChat Pay to hold guaranteed rates over a period of time to hedge currency exposures.

As the company was collecting funds from consumers and making payments to overseas merchants in multiple currencies, J.P. Morgan set up multicurrency accounts in Hong Kong to streamline this process and settle foreign currency payments at lower conversion rates. Setting up the backend infrastructure in Hong Kong also gives the company the added flexibility to book transactions either through CNY (onshore yuan) or CNH (offshore yuan) – as these currencies fluctuate daily, the firm can opt for the best rate to process daily transactions.

To allow seamless execution, the solution is integrated with WeChat Pay’s in-house enterprise resource planning (ERP) system via host-to-host, automating the entire payment process as well as facilitating quicker processing of merchant payments in over 120 currencies at greater efficiencies and lower costs. The company also established connectivity with J.P. Morgan’s Treasury Services API to receive account balances and transaction status reporting in real-time. The solution’s track-and-trace feature provides the company with immediate visibility into its cash balances and payment status while also receiving on-demand reporting of account balances to facilitate reconciliation. This enables enquiries from overseas merchants to be handled in a much quicker manner.

Best practice and innovation

This comprehensive solution has enabled the organisation to automate its treasury and FX management processes to deliver an enhanced experience for both e-Wallet users and retail merchants to support its overseas expansion.

WeChat Pay has benefited from improved cost efficiencies for merchant payments by fully automating the payment process through host-to-host connectivity and competitive payment cut-off times, enabling merchants to receive payments in a faster manner. The API-powered FX and reporting solutions have also further strengthened its position in the market, allowing the firm to book and settle transactions at highly competitive rates and access account balances and payment status in real-time to better manage cash positions.

Key benefits

• More competitive and guaranteed FX rates.
• Reduced turnaround time for payments.
• Improved FX exposure management.
• Increased visibility of account balances and end-to-end payment status through API.
• Reduced transaction costs and improved efficiency in payment processing through increased automation.

“As a result, payments across 120 global currencies are accepted, allowing us to both minimise FX exposures and satisfying local clearing house implementation at the same time,” says Wenlong Huang, Senior Business Development Director. “We are proud to serve our customers and merchants better, and look forward to implementing more innovative solutions for our customers in the future.”