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(WSJ) Tencent Holdings Ltd. plans to add a personal loan feature to its popular WeChat smartphone messaging application later this month, in the latest step in the Chinese Internet giant’s expansion in online financial services, according to people familiar with the matter.
The new WeChat feature called Weilidai — which literally means “a tiny bit of loan”—allows users to borrow up to 200,000 yuan ($31,350) without guarantee or collateral. The Weilidai service is operated by WeBank, an Internet bank launched in January by Tencent and Chinese financial firms.
Internet finance is the next major battleground for two of China’s largest technology companies — Tencent, whose main services are online games and social networks, and online shopping giant Alibaba Group Holding Ltd. Both Tencent and Alibaba, through its affiliate, offer online payment services and are starting to play greater roles in the country’s burgeoning market for online financial services.
Tencent is the biggest shareholder of WeBank with a 30% stake, while Alibaba’s financial affiliate, Ant Financial Service Group, operates MYbank, an online bank that began its service in June. Using data collected from hundreds of millions of smartphone owners, the Internet giants can provide micro loans and other financial services to individual consumers and small-business owners who had previously been underserved by China’s traditional banks, analysts say.
WeBank launched Weilidai through its own mobile app and Tencent’s Mobile QQ messaging app earlier this year. Adding the loan service to WeChat will be an important step, given that WeChat’s main user base includes financially stable white-collar workers in major cities, analysts say. As of June, WeChat had 600 million active users, while Mobile QQ had 627 million active users, according to Tencent.
“Between WeChat and Mobile QQ, Tencent covers most of China’s smartphone users,” said Jefferies analyst Cynthia Meng. By offering the personal loan service through the two messaging apps, Tencent and WeBank can identify creditworthy users who could become customers for other financial products and services, Ms. Meng said. “This is the beginning of Internet finance,” she said.
Using the new Weilidai feature, WeChat users can receive money in just a few minutes after submitting their applications. They apply for loans by giving their traditional bank account information and other basic personal data, and Weilidai assesses their credit based on its own data as well as individual loan status information from the People’s Bank of China, according to people familiar with the matter. The credit assessment process could take less than a minute. While interest rates vary based on the user’s credit levels, on average, the daily rate is 0.05%. The terms for the loans are up to 20 months.
In late July, WeBank said its outstanding personal micro loans amounted to 800 million yuan, without disclosing the number of borrowers.
Still, how far Tencent and WeBank can expand will depend in part on Chinese authorities. WeBank uses facial recognition technology to verify users’ identities before allowing them to bundle their traditional bank accounts with WeBank’s online accounts. Because regulators are still concerned about the technology, there are limitations to what users can do with the online accounts, a person familiar with the matter said. For example, users cannot transfer money from their online WeBank accounts to other people’s bank accounts.
“Internet finance is still at its early stage, and the regulatory framework is still evolving,” Ms. Meng said.
Source: Wall Street Journal by Juro Osawa
Source:: Tencent’s WeChat App to Offer Personal Loans in Minutes