In the war between Tencent and Alibaba for China's emerging mobile payment market, cab-calling services have become the unexpected battlefield.

Smartphone apps Didi (Tencent) and KuaiDi (Alibaba) are competing for Chinese passengers who hail a cab through their online services.

Didi said last Tuesday that if passengers pay the taxi fare via WeChat also owned by Tencent, they will get a 12 yuan (US$1.97) subsidy. Hours later, KuaiDi promised publicly to cut "always one yuan more than our competitor" off the price if the payment goes through Alipay.

In Beijing, a 3-kilometer taxi ride could be free as the starting fare is 13 yuan. In smaller cities where starting fares are lower, consumers may even profit.

As the competition heats up, the question to ask is whether the price war can be sustained, and a more healthy development of the mobile payment market sought.

Alipay now leads mobile payments with nearly 300 million registered users, 100 million of whom use mobile phones.

Last year, those users made 2.78 billion transactions, with an aggregate turnover of 900 billion yuan, over five times the US$27 billion posted by Paypal in the same period.

Close behind is Tencent's WeChat, China's largest social networking app with over 500 million users globally.

During the Spring Festival holiday from January 31 to February 6, WeChat users on the Chinese mainland distributed nearly 200 million yuan of "lucky money" to one another through the platform. That marketing maneuver has given WeChat an edge as users scramble to cash in their gifts that have to link at least one cash card.

Alibaba Chairman Ma Yun described the lucky money maneuver as akin to a "surprise attack on Pearl Harbor."

While the skirmishes escalate, researcher Yi Jingxue with Analysys International sees "no clear profit model for cab-hailing apps yet."

"The real emphasis of the rivalry should go beyond looking for new users to cultivating user loyalty," said Yi.

"For mobile Internet products, network traffic means profits, which is why the number of users is of ultimate importance," Yi explained.

An outright war in the mobile Internet market does not seem avoidable as consumers want to get connected all the time.

By the end of 2013, 500 million Chinese accessed the Internet via mobile phones, or 81 percent of the country's netizen population, figures from China Internet Network Information Center showed.

"This is the reason why the two firms are promoting mobile Internet products. Mobile Internet services will make people's lives more comfortable and convenient," Hu Yanping, director of DCCI Data Center of China Internet.

The two companies have different approaches.

Alipay wins users via money transfers and card payments. Tencent attracts mobile payment service users through its mobile social-networking and game apps.

"It's too early to say which will top the mobile payment market as two thirds of the market have not been developed," said Hu.

He said the winner will be judged on four areas essential to profit — the number of registered users, user activity, monthly mobile payment by the average user, and the number of merchants that accept payment via phones.

Once fully developed, China's mobile payment market will be four times as large as that of e-commerce, Hu predicted.

Apart from cab-calling services, there is competition in personal finance products, maps, meal-ordering, social-networking apps, mobile gaming platforms as well as e-commerce.

Tencent said last Wednesday that it had purchased a 20-percent stake in the country's lifestyle and group buying website Dianping.com.

Dianping's content, user base and offline retailer network will be integrated with Tencent's social communications platforms to build an online-to-offline service, said a joint statement.

Alibaba, on the other hand, has acquired digital mapping and navigation firm AutoNavi for US$1.39 billion, turning it into a fully-owned subsidiary. AutoNavi will not only direct smartphone users to get to places but also inform them about where their favorite services and products can be found.

Tencent and Alibaba also compete in personal finance.

Yu'ebao, an online product launched by Alipay and Tian Hong Asset Management Co Ltd has lured 49 million users who have deposited over 400 million yuan in less than a year.

Tencent and China Asset Management's online asset management services let users deposit money and get up to 7 percent of the annualized seven-day interest.