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An Internet-based fund generates $4 billion in income for online shoppers in China

March 30, 2015 04:50 PM
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Yu’ebao, an Internet-based money market fund offered through Chinese online payment platform Alipay, has generated 24 billion yuan ($3.86 billion) in returns for its 185 million users in 2014. The total assets of the fund increased 213% to 579 billion yuan ($93 billion) in 2014 from 185 billion yuan ($30 billion) in 2013. Ant Financial Services Group, the operator of Alipay and an affiliate of Alibaba Group, recently released the data. 

Launched in June 2013, Yu’ebao works as an investment product, allowing online shoppers to earn interest on idle cash in their Alipay accounts, yet still give them access to pay for goods and services. Online shoppers only need to click one button—there is no fee—to transfer their Alipay cash into their Yu’ebao account, and they can use their money directly from Yu’ebao when they buy items online.

Money in Yu’ebao can generate annual yields of 4% to 7%, which is much higher than interest rates offered by banks, which typically are 0.2% to 1%.  Those higher returns explain why the number of consumers using Yu’ebao has exploded since its launch. Yu’ebao users have increased more than fourfold to 185 million in 2014 compared with 43 million in 2013.   

Yu’ebao has become the fourth-largest fund in the world, Ant financial says. Current annual yields of the fund are about 4.5%.

Ant Financial obtained an online banking license from the China Banking Regulatory Commission in 2014 and has expanded into more banking businesses. Ant Financial also provides financial products, including loans, insurance and mutual funds to online consumers through Zhaocaibao.alipay.com. The total value of transactions on the site reached 4.9 billion yuan ($789 million) in last week, according to Ant Financial.  

Ant Financial is not alone in selling financial products online in China. Alibaba’s major rivals almost all cut into this market as the deregulation in private banking offers them a lucrative opportunity. For example, Chinese Internet behemoth Tencent Holdings Ltd. also won an Internet banking license last year for its Shenzhen Qianhai Micro Focus Bank, which provides services similar to those of Ant Financial.

Tencent’s e-commerce site Yixun is No. 8 in the Internet Retailer 2015 China 500. Alibaba is not ranked in the China 500 because, like eBay Inc., it is not a retailer but a platform that connects merchants with consumers.

 

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