China's internet financiers get lucky money

The Chinese tradition of giving gifts of red envelopes stuffed with cash went virtual and viral ahead of lunar new year as China's Internet moguls court the booming Internet finance market. Since last Sunday, WeChat, Internet giant Tencent's flagship mobile messaging application, has allowed its 600 million users worldwide to send and receive virtual red envelopes via a new add-on service. Red envelope givers can randomly allocate amounts of money in virtual red envelopes for chatroom users to grab. The lucky money, ranging from a few cents to 200 yuan (33 U.S. dollars), is later credited to the recipient's bank account. The service, a clever take on a Chinese Spring Festival tradition with a competitive gaming design, became popular among WeChat users who rushed to give or grab lucky money and share their comings and goings through WeChat posts. "It is exciting both to give and to grab. I gave 30 yuan but grabbed 44.48 yuan today. It paid to be a giver and spread the luck," said Rong Jiao, 34. The service is actually nothing new. Tencent's main domestic rival Alibaba offered virtual red envelopes through its payment platform Alipay last year. Wu Yi, product manager of the service, attributed the viral popularity to longstanding Chinese tradition, WeChat's social networking friendly features and entertaining elements in product design. The popularity of the virtual red envelopes among WeChat users showed that mobile Internet applications have enabled social networks to expand from families and close friends to more people with weaker links, said Zhong Xin, a communications professor with Renmin University of China. The new service is the latest move by Tencent to cash in on its popular WeChat platform via e-commerce and online wealth management products. The Internet giant added a payment service to WeChat in June last year for mobile shopping and payment via smart phones, then rolled out a wealth management product on the platform two weeks ago, boasting a seven-day annualized rate of return above seven percent, topping that of its major rival Alibaba's Yu E'bao. Tencent joined with DiDi Taxi, a leading cab-calling application, two weeks ago to offer discounts for passengers and bonuses for drivers who struck the deal through the app and paid through the WeChat payment platform. Over 100 thousand deals were done in two days. The partnership rivals a similar deal between Alibaba and another leading cab application, highlighting the fierce competition between the two over the mobile Internet and Internet finance markets. Virtual lucky money, online wealth management and calling cabs are just the tip of a colossal Internet iceberg, floating now in traditional waters, and many more surprises based on big data, mobile technology and payment services, lie beneath the surface. "The Internet is challenging almost all sectors, information-intense industries in particular, and will keep on changing people's lives," said Zhao Guodong, an expert in big data. The picture is not entirely rosy. Internet finance, despite its popularity and convenience, poses risks for users and the economy at large. Economics commentator Niu Wenxin calls Alipay a vampire. He says too much money flowing from banks and the real economy to Internet coffers may raise financing costs for already cash-strapped small businesses and bring new risks to commercial banks. "The high return on Internet finance products is not sustainable if they invest too much in risky sectors such as real estate and trusts," said Zhao Qingming, finance professor with the University of International Business and Economics. "Investors should treat Internet finance with more circumspection, instead of just following the herd," Zhao added