The internet is a game changer--that’s transformed the retail industry, the gaming industry and now it’s set to turn another industry upside down: the taxi industry. Yang Chengxi shows us how it’s going to be a fast ride.

Middle aged taxi drivers -- not usually the first responders to new technology but now they are. New taxi apps have taken the Chinese market by storm since last year and many drivers now use them to quickly locate customers.

"After I used the app I am making a few more hundred yuan a month." a Beijing taxi driver said.

The apps are popular with riders as well, especially in Chinese mega cities where it’s notoriously hard to get taxis.

Let’s do an experiment. I’m in the outskirts of Beijing, 40 kilometers from downtown. I’ve been trying to get a taxi but I ’ve been standing here in this January coldness for almost 30 minutes. Let’s see how these taxi apps can help solve my problem.

Well that took me less than five minutes. The apps’ huge market potential attracted the internet giants Tencent and Alibaba. They have ploughed cash into the two main developers, Didi taxi and Kuaidi taxi. After the investments, Tencent has added a new feature to its messaging app WeChat, which allows its 300 million monthly users to book and pay for cabs on Didi taxi. On the other hand, Kuaidi taxi is now built into Alipay, China’s largest third party payment platform. Since the two taxi apps now support mobile payment, the competition has been taken to a higher level.

"It has turned into a competition between the two internet firms in the area of mobile internet payment. They’re both looking to foster people’s loyalty in mobile payment habits in every service. The taxi app is an area they want to expand into". Sherry Yin, Analyst said.

Mobile payments in China nearly quandrupled between the first half of 2012 and 2013 to 21.4 billion US dollars. This has become the most important battlefield for the internet industry. In the latest move to grab users -- both Didi and Kuaidi are giving large discounts to customers and kick-backs to taxi drivers. As a result, questions are being raised about the apps’ future.

"This practice to gain market share is reasonable at the early stage of competition. If they are going to charge users in the future, they need to make sure the convenience of using the app outweighs the cost. That means they’re going to need a huge user base to start with". Sherry Yin said.

Up until the third quarter of 2013, Kuaidi holds 41.8 percent of the Chinese market while Didi taxi has 39.2. Analysts say this competition between the proxy players will become more cut-throat in 2014. The battle between the giants has just begun.

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