Chinese New Year lasts from February 5 to February 19, 2019. In our Chinese New Year Preview report, we predicted Golden Week retail and food-service sales would hit ¥1 trillion (US$148 billion) this year, up around 8%. We also noted increasing volumes of red packets going digital, and we expect that trend to continue. In this report, we present early data from Tencent, the owner of WeChat, and recap key numbers that represent the growing significance of virtual red-packet gifting. Tencent Updates on WeChat’s Digital Red Packets One of the most important Chinese New Year traditions is giving hong bao, or lai see in Cantonese — red packets with money inside given to children, relatives’ and friends’ children, among others. Now, using WeChat features, users can send red packets digitally. In its annual New Year’s data report released February 5, WeChat stated that 14.2% of the red packets that were sent on New Year’s Eve used WeChat’s new feature, introduced this year, which allows users to customize greetings sent with the digital red packets. Monetary gifts in red packets are also given to people for good luck and on special occasions such as graduation, weddings and on the birth of a child. Traditionally, older people gift these to younger family members and middle-aged users gift these to parents and children, as well as to friends. WeChat said those born in the 1990s are the biggest number of users, followed by those born in the 80s and 70s. WeChat data also indicate that 8:00 PM to 9:00 PM on Monday, February 5, was the busiest time to exchange New Year greetings — coinciding with the first hour of the roughly four hour-long Spring Festival Gala, a popular TV show on CCTV most families watch during the celebratory dinner. China UnionPay Sees 81.3% Year-Over-Year Growth in Interbank Transaction Value China’s UnionPay, a financial services network which processes payments made via WeChat, Baidu and other applications, saw interbank payment and settlement transactions reach ¥261.7 billion yuan (US$39 billion) on Chinese New Year’s Eve, up 81.3% year over year, according to Shanghai Securities News. The media outlet also said the average response time per transaction processed by China UnionPay was 220 milliseconds, and there were no failed transactions. Race Intensifies with Market Leaders Touting Higher Value Prizes in Festive Games Each year, a mobile payment provider or technology platform partners with broadcaster CCTV to give away prize money through games on the New Year’s Gala, the most-watched television special in the country. Each year the games vary based on what the red packets partner decides to do — for example collecting cards or identifying characters in virtual reality through the partner’s app. This year, search platform Baidu partnered with CCTV, with This event also saw Baidu’s users double to 300 million overnight. Alipay re-launched its “fortune cards collection” game which was popular in previous years. Users who collect all cards in the game share a ¥500 million (US$74 million) red packet.   [caption id="attachment_71283" align="aligncenter" width="640"] Source: China Daily[/caption]   Even as other platforms catch up, WeChat seems poised to continue to lead digital red packet gifting for a long time due to its early mover advantage and size of userbase. Tencent, Digital Red Packet Pioneer Tencent first introduced digital red packets in 2014, and user numbers have been growing since. In 2018, WeChat said some 688 million people used the app to send red packets, up 15% from 2017. The 688 million senders represented around 66% of WeChat’s total 1.04 billion monthly active users (MAUs) as of the first quarter of 2018, and 49% of China’s entire population. [caption id="attachment_71284" align="aligncenter" width="640"] Source: ChinaChannel.co/Tencent[/caption]   This year, WeChat has gone a step further and introduced customizable gift packages on its app which allows users to add wishes and stickers to the money being gifted. Alipay, which crossed 1 billion users in January this year, has a way to go before it catches up to WeChat. As of October 2018, the penetration rates of Tenpay (WeChat Pay and Tencent’s QQ Wallet) and Alipay were 85.4% and 68.7% respectively, according to market data company Ipsos. Red packet sending was the third most popular use for Tenpay and Alipay, with 60% indicating it as a usage scenario for mobile payments, after phone top-up (69%) and money transfer (63%). For last year’s Spring Festival, only 31% of respondents to a survey by intelligence firm Lightspeed Research indicated they would use Alipay to send red packets.   [caption id="attachment_71286" align="aligncenter" width="640"] Source: Lightspeed Research[/caption]   What We Think Early data from WeChat indicate its platform has been lively through initial festival gifting and with the size of its user base surpassing Alipay’s by nearly 80 million, it is likely to continue be the leading choice for mobile payments. Even as players such as Alipay and Baidu grow their user bases and offer more prize money through festive promotions, WeChat’s advantage as an early mover places it ahead in the digital payments and red packet gifting race.