Text, Chat, Profit: Tencent Launches Investing on WeChat

January 24, 2014 Leave a comment

Text, Chat, Profit: Tencent Launches Investing on WeChat

Jan 22, 2014

If imitation is the sincerest form of flattery, just about everyone in China’s Internet industry is kowtowing to Alibaba Group Holding Ltd.
On Wednesday, Tencent Holdings Ltd.TCEHY +2.35% followed Sina Corp.SINA +0.97%and Baidu Inc.BIDU +1.00% in rolling out an online financial-services product similar to Alibaba’s popular Yu’E Bao
. Users of Tencent’s WeChat app can put money directly in the fund, which is run by China’s largest mutual-fund manager, China Asset Management Co.600030.SH -1.24%
The new service is no doubt aimed at competing with Alibaba’s service, which was introduced last year. It’s also likely a ploy by Tencent to entice users to link their bank and WeChat accounts. The fund, called Licaitong, offers an impressive 7.3940% seven-day annualized yield, besting Yu’e Bao’s rate by almost 1%.
China’s financial sector has long been dominated by state-owned banks, but technology companies have begun to enter their turf by using online platforms to push innovations in the sector.
Though Alibaba was first to push into the sector, others have been hot on its heels. It isn’t known how many customers or how much investment Licaitong attracted on its first day, but a promotion giving away cash prizes to promote the new product attracted enough users to crash the system, according to Chinese magazine Caixin. Tencent’s official QQ customer service said the promotion has been postponed.
Tencent and Alibaba didn’t respond to requests for comment.
Even so, Tencent likely has its work cut out for it if it wants Licaitong to rival Alibaba’s Yu’e Bao in popularity. As of Jan. 15, Yu’e Bao had attracted more than 49 million customers with more than $40 billion in investment.
That made Tianhong Asset Management Co., which manages the fund Yu’e Bao is based on, rise from a no name in the industry to the second-largest mutual-fund manager, threatening the throne held by China Asset Management.
Yu’e Bao’s success is due in no small part to Alibaba’s two biggest strengths, its online e-commerce platform Taobao.com and its online-payment system Alipay, which many online shoppers have grown accustomed to depositing money in.
Taobao clients can transfer their Alipay funds to Yu’e Bao, which offers a higher yield than bank deposit or deposit-like wealth-management products. Like current deposits at banks, money invested in Yu’e Bao can be used to shop on Taobao and can be withdrawn at any time, up to 1 million yuan per day (about $165,000).
Though Tencent has more than 272 million users, it doesn’t have a mature e-commerce platform and users aren’t nearly as comfortable transferring funds in and out of WeChat. Even if they do put money into Licaitong, they must do so directly from their bank account, not through an intermediary like Alipay, which facilitates Yu’e Bao’s exchange.
“The yield offered by Tencent is quite appealing, but it’s not as convenient as Yu’e Bao, which can be easily used for online shopping. I will wait and see if Tencent will continue to offer such a high rate or provide better services than Alibaba,” said Song Chen, a Beijing resident who currently has money invested in Yu’e Bao.
Still Tencent seems determined to use investment products to win over users. In the future, the company said it plans to launch three other investment services, based on funds provided by China Universal Asset Management Co., E Fund Management Co., and  Guangfa Fund Management Co.

Filed under TMT Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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