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Nov. 19 (NBD) – Chinese tech giant Tencent started on Friday public testing of Lingqiantong, an in-built WeChat feature that combines money market fund investment and mobile payment, posing a direct challenge to Alibaba's similar service Yu'E Bao.

Users can transfer money from their balances in WeChat or linked debit cards into Lingqiantong, where the money can be used to purchase money market funds, as well as for mobile payment in all consumption scenarios. Money can also be withdrawn from Lingqiantong at the users' will without fees. 

Lingqiantong offers four funds with 7-day annualized rate of return ranging from 3.037 percent to 3.275 percent, higher in average than those of Yu'E Bao, while the latter offers more fund options. 

Lingqiantong comes at a time when the central bank is tightening control on provisions deposited in payment institutions. 

People's Bank of China issued a circular in July demanding all payment institutions to deposit 100 percent of their total client funds for collective management by January 14, 2019. The policy means payment institutions like WeChat can't make investment with client funds. Thus they need to provide financial services as a new way of creating earnings.

With rapid development of mobile social network applications and mobile payment in recent years, Chinese people have accumulated a vast amount of change on digital platforms, especially in WeChat's balance accounts. 

According to a report by Tencent Licaitong, the company's wealth management platform and Tencent Financial Technology Think Tank released on November 8, Chinese people possess 1.7 trillion yuan (245.5 billion U.S. dollars) worth of change, among which 1.5 trillion yuan (216.6 billion U.S. dollars) were financially untapped, amounting to an annual interest loss of 57.32 billion yuan (8.3 billion U.S. dollars).

WeChat's red packet, according to the report, is the major source of Chinese people's change. The launching of Lingqiantong is set to activate the dormant money deposited in WeChat. 

Previously, WeChat users can buy money market funds through Licaitong by transferring money from their linked bank cards, but were not able to earn interests from their WeChat balances.

Many industry insiders view Lingqiantong as Tencent's long-awaited move to tap into WeChat's enormous user base. 

In comparison, Alipay, mobile payment paltform by Alibaba's affiliate Ant Financial, started Yu'E Bao in 2013, and it has grown rapidly to become the world's largest money market fund in 2017, surpassing JPMorgan Chase & Co.'s U.S. government money market fund.

Email: limenglin@nbd.com.cn