Tencent Inc, owner of China's most popular mobile phone social app WeChat, has announced that it will charge fees for withdrawing money from the app's "wallet" from March 1.
The wallet is one of the many functions of WeChat, often misunderstood as a simple messaging app outside China. In fact, WeChat aims to address every aspect of a user's life, social or non-social.
The wallet alone, linked with bank accounts, allows the user to book tickets for movies, trains and flights, order food deliveries, pay utility bills and credit cards, buy financial products, donate to charity and transfer money directly to other users.
In the recent Lunar New Year holiday, about 32.1 billion virtual red envelopes of cash were sent via WeChat, nearly 10 times the amount last year with 516 million people joining in. People born after 1990 sent the most -- nearly 2.6 billion.
The red envelops are only an indication of the huge transaction volume at WeChat. At least one in five of the app's 549 million users are paying with the wallet.
Tencent has to pay transaction fees but has never charged users. The decision to charge the fee is to cushion rocketing costs, Tencent said in a statement on Monday.
Users will have a withdrawal quota of 1,000 yuan (150 U.S. dollars). Withdrawals will incur fees not less than 0.1 yuan when the quota is used up. Other forms of payment and money transfers will remain free. "Withdrawing" means transferring money out of the wallet and back into a bank account.
China's mobile banking market passed 9.3 trillion yuan in 2015, of which Tencent's apps made up 17.4 percent, 1.6 trillion yuan, according to a report by consulting firm BigData. WeChat's wallet took about one trillion yuan, which translates into a few hundred millions of yuan in transaction fees, Li Chao, analyst with consulting firm iResearch said.
In addition to saving Tencent's costs, the change is meant to discourage users from putting their money into their bank accounts.
The volume of mobile banking transactions in China is expected to exceed 28 trillion yuan in 2016.
The combination of social apps and payment is the future of mobile banking in China. It is a field where social apps are fighting to build richer and easier payment experiences to attract and maintain users and encourage them to spend, Cheng Li, analyst with China E-commerce Research Center, said.
