Tencent Incubates New Financial Product Fenfu to Take on Ant Financial’s Huabei

Chinese tech giant Tencent is incubating a financial credit product named Fenfu, which functions similarly to a credit card, and is expected to become available through the company’s instant messaging app WeChat in the fourth quarter of this year according to local Chinese media outlets.

Once a user is qualified, Fenfu will act as a virtual credit card accessible via WeChat for users to make purchases and repay the bill at a later date. In addition, it will grant loans which can be interest-free for about one month, plus other micro-credits options and long-term financial services.

The new Fenfu financial tool is not only Tencent’s attempt to deepen its footprint in China’s fintech sector and compete against industry incumbents such as Alibaba subsidiary Ant Financial’s Huabei and JD.com’s Baitiao, but also a means for Tencent to reel in additional revenues by charging users and collecting late payment fees.

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WeChat and Alipay both boast hundreds of millions of users in China. The introduction of credit payment products to users can effectively raise consumption propensity and increase sales to tens of millions of merchants. Furthermore, the introduction of installment repayment acts as a powerful catalyst to stimulate additional spending and sales.

Yan Zhijun, vice president of Tencent‘s WeChat business group, revealed earlier this year that the current WeChat payment systems connects 50 million individual merchants.

Tencent said its fintech and business services revenues were 22.9 billion yuan ($3.2 billion) in the second quarter of this year, up 37% year-on-year. This segment grew faster than its gaming, online advertisement, and digital content businesses.