Battle highlights Internet finance services as next revenue growth spot

The commercial "war" between China's leading Internet duo has moved to a new battlefield, with both identifying Internet finance as the next hotspot for revenue growth.

E-commerce vendor Alibaba Group Holding Ltd has announced it would block webpage links that redirect users to other Internet platforms, marking its latest counterattack against an aggressive expansion by Tencent Holdings Ltd's WeChat into the online transaction territory.

Over the weekend, Alibaba's customer-to-customer marketplace Taobao circulated a memo to its vendors announcing that quick response codes with links to external websites would no longer be allowed.

By scanning these two-dimensional barcodes, a familiar sight to smartphone users, shoppers may skirt the Alibaba system and be guided to complete a transaction via the likes of WeChat, a mobile messaging application that has just made online payment functions viable.

Alibaba's announcement amounts to one month's prior notice. The company will start imposing penalties starting Sept 10 on those who ignore its rules by lowering their credits, which are crucial gauges of their ratings and credibility.

Alibaba maintained that these services tend to redirect buyers to platforms other than the Alibaba payment system, where a lack of supervision may lead to potential security loopholes.

Alibaba's decision is widely seen as additional retaliation against Tencent, which incorporated online transaction functions into the latest update of WeChat last week.

Using scanner tools, a longstanding function of WeChat, goods can be scanned using a product's barcode, directing users to the e-commerce website offering the product and enabling them to order it immediately.

The purchase can be finalized via a newly-integrated payment function, which is backed by third-party payment platform TenPay.

Critics have suggested that the move could also be a swipe at Tencent's WeChat chat app, which is very QR code-friendly and which has just introduced its own mobile payment system.

"While concerns about fraud certainly seem reasonable, it's also reasonable to assume that Taobao - like any company - isn't going to facilitate competition.

"Allowing externally-linked QR codes would likely make it easy for Taobao vendors to complete transactions through WeChat, essentially keeping Taobao completely out of the loop," said Charlie Custer, editor of Tech in Asia, an IT blog.

The partnership offers shoppers an alternative payment option from the dominant Alipay, Alibaba's indigenous payment system, and kicks off a critical step for WeChat to capitalize on its popular service.

Third-party payment tools have shaken up the domestic online payment arena, claiming more than 80 percent of transaction volumes last year, according to a research note from China Securities Co Ltd.

The war between the Internet titans has intensified since the beginning of August, when each party sought to ban the other's marketing services for online vendors to protect their respective mobile Internet systems.

Via a partnership with Sina Corp, in which Alibaba owns an 18 percent stake, the e-commerce giant has even rolled out a version of micro blog-like online stores for its merchants to diversify channels for their public exposure.

This new fusion "Weibo store" will be geared toward social commerce, where the service is optimized to allow direct posting of Taobao products to Weibo.

Ji Lin, a Shanghai merchant who sells hair accessories on Taobao, said the new rule won't affect her overall business.

"I don't care if I am restricted from advertising on WeChat. What really matters is the reputation of my store. I can maintain it via Weibo anyway," she said.