WeChat Pay has 800 million users but no direct lending facility so far, this is set to change from Q4 of this year.
Tencent is now incubating a credit payment product tentatively called 'FenFu' (分付), following similar products from JD and Alipay. In the future, when users use WeChat Pay, they may choose the 'FunFu' first, then extend the payment period or pay the bill by installments. This service will be operated by the WeChat Pay team, and is currently under negotiation with some banks and licensed consumer finance institutions for cooperation. The new tool will allow users to borrow without having a credit card from banks.
In February 2014, JD.com launched 'Baitiao' and in April 2015, Alipay's 'Huabei' officially got underway. Consumer loan services became more popular in 2016, especially among the younger generations. Expanding into credit and loans has become a popular way for mobile payment providers to offer additional financial services. Based on the huge eco-systems of Alibaba and JD.com, those two payment services have been able to create lots of benefits from credit payments.
In terms of market share, WeChat's credit payment product might be the most powerful competitor for 'Huabei', since WeChat Pay and Alipay occupy about 90% of the current mobile payment market in China. According to the iResearch report, in the first quarter of 2019 the market size of China's third-party mobile payment transactions reached CNY 55.4 trillion, with a YoY increase of 24.7%, of which Alipay accounted for 53.8%, and WeChat Pay accounted for 39.9%. In January of 2019, Alipay announced that the number of users worldwide had exceeded 1 billion, including 300 million overseas users and 700 million domestic users. As of November last year, Alipay had more than 650 million active users per month. The number of users of WeChat Pay at the end of 2018 also exceeded 800 million.
In fact, from the perspective of Tencent itself, it seems that to stimulate its financial technology business growth, this credit payment product is urgent. Since the second half of last year, Tencent has split its financial technology function into an independent business, which is becoming one of the three core businesses, alongside value-added services and the online advertising businesses. Tencent seems to be interested in making financial technology one of its main development strategies for the future.
From its second quarterly report, Tencent's financial technology and corporate services revenue has increased by 37% YoY, reaching CNY 22.9 billion. In terms of financial technology services, the number of users, the transaction volume and the income all increased rapidly, which boosted the revenue of this segment.
Geng Zhijun (耿志军), vice president of WeChat, revealed that the daily average transaction volume of WeChat payment exceeds 1 billion, connecting 50 million individual merchants. There is no doubt that the consumer market it has connected is huge.
However, one concern now is that the average bill amount of WeChat Payment is normally less than of Alipay, which may mean the demand for installments might be relatively low. It is not easy to be profitable without charging users much in installments or applying late payment fees. Whether Tencent's credit payment products can break the consumer financial market will be verified in time.