A drive by Chinese firms to incorporate the lunar new year tradition of distributing lucky money in red envelopes on to social media is being tipped as a catalyst for a fund industry revolution.
Tencent’s WeChat, Sina’s Weibo and mobile payment platforms such as Alipay have made the practice of handing out hongbao, or a red packet, available via online chat forums. Some have also introduced associated opportunities to win “lucky money”.
Red-packet transactions hit Rmb4 billion ($640 million) on Alipay by the end of the first day of the lunar new year. Figures for WeChat and Weibo were not disclosed.
Shanghai-based consultancy Z-Ben Advisors has forecast that WeChat could garner up to 200 million new clients through its red-packet programme. In this it expects WeChat to outperform Alibaba’s online payment platform Alipay, which was used to launch money-market fund Yu’E Bao together with Tianhong Asset Management in June 2013.
This one MMF catapulted Tianhong to China’s largest fund firm within six months, although Z-Ben sees WeChat’s capacity to attract new clients as greater than Alipay.
Red-packet fundraising success is seen as a catalyst for internet and fund firms to use social media to popularise equity and bond funds as well.
Already WeChat has seen its share of China’s mobile payments market grow to 10% as of last September, from 4% at the start of 2014. It is forecast to hit the mid-teens by the end of this quarter, largely due to its red-packet campaign. Alipay is the dominant mobile payments player at present with an 83% market share.
Where analysts see room for industry revolution is in linking digital red-packet campaigns with money-market funds and other securities offerings.
WeChat’s wealth management function, LiCaiTong, is linked to four money-market funds that offered seven-day annualised yields of 4.13% to 4.56% as of February 27. That compares with 0.35% on average for bank savings accounts.
Z-Ben analyst Ivan Shi pointed to the potential for red-packet campaigns to direct social media users to engage with a mobile payment platform.
“MMFs provide a cash management function through mobile payment platforms. Such platforms could perform a savings function through linking with fixed income funds and an investment function through linking with equity funds,” said Shi.
Although such developments may be distant, Z-Ben expects WeChat’s parent WeBank to follow in Alibaba’s footsteps by buying into a domestic fund company. Both WeBank and Ant Financial (Alipay’s parent) are expected either to buy or to create a brokerage arm.
In that way both the fund house and the brokerage could be a source of individual savings and investment and provide a basis for product development.
Ant Financial, Alibaba’s online financial services affiliate, made a capital injection last week that will see it take a majority 51% stake in Tianhong AM. Ant Financial is also reportedly in talks to buy a stake in Shanghai-based Tebon Fund Management.