Yuebao, launched in mid-2013, is a mutual fund tailored to Alipay users. 43.03 million Alipay users adopted it in half a year since its launch. A total of RMB185.3 billion ($30 bn), an average of RMB 4307 ($700)  per user account, were transferred into Yuebao that generated RMB1.70 billion in total return in half a year, disclosed Alipay, the online payments service of Alibaba Group.

It takes only one click to transfer the balance in an Alipay account to Yuebao on either the website or the mobile app, Alipay Wallet. The mutual fund is managed by THFund, a mutual fund company Alibaba bought a controlling stake in in 2013 —  THFund raised to the second biggest mutual fund company in terms of the total assets under management in 2013, up from lower than 50th one year ago, thanks to Yuebao. Users can use the money in Yuebao for online shopping anytime they like.

Yuebao’s slogan is “14 times of the return from banks”. It sounds attractive, but Yuebao doesn’t perform better than the average mutual funds. The convenience must be a key factor in attracting users. Another attractiveness is Yuebao shows returns daily. I’ve heard people say that they’d open Alipay app daily to check returns. Not every user knows how to calculate compound returns. Knowing how much exactly you are receiving everyday must be a pleasure.

Apart from running a mutual fund by using user’s balance, there’s a bigger picture for Alipay. Before long, several Chinese Internet companies launched online mutual funds and gave them similar names, such as Suning’s Yifubao, but none could be the same with Yuebao. Alipay itself was established for Alibaba’s e-commerce marketplaces. When one user uses money in Yuebao for shopping on Alibaba’s platforms, that will be translated into transaction-based commission to Alibaba. If Yuebao is widely recognized and users would always deposit money into it, users don’t have to make payments through banks anymore. When it comes to the mutual fund itself, the more users on board and more money tansferred into it, the lower, theoretically, the risk.

Fan Zhiming, president of Alifiance for Domestic Market, said at an event last month that they’d possibly make Yuebao a default that any balance in an Alipay account would buy the mutual fund automatically.

Alifinance, the finance arm of Alibaba Group, has already disrupted China’s finance sector with services like Alipay and small loans for online retailers. In recent years, other Chinese companies also have been working on digital payments, online peer-to-peer funding or other Internet-based financial services. But in 2013 it was obvious that people placed high hopes on Internet-based financial services, seeing them to materially change the financial market in China.

One thing that raised their hope is China has been undergoing economic reforms in the past couple of years. The old manufacturing industry got into trouble and the society expected private SMEs to save the economy. But previously it was very hard for small businesses in China to get loans from state-owned banks. Hundreds of online peer-to-peer funding platforms emerged in 2013 thinking they could take advantage of the needs of small businesses. That includes Dianrong, based in Shanghai and founded by a co-founder of  US-based peer-to-peer service Lending Club.

The reform plan China’s central government released in November 2013 allows qualified private investors to set up banks. Shanda, the veteran online gaming company, is the first Internet company that settled in the newly established Shanghai Free Trade Zone, planning to build Internet-based financial business and a joint bank there.

Tencent joined some investors to set up a private bank. The Chinese Internet giant plans to input RMB10 billion (about $1.64 billion) into financial companies it has established in the Qianhai Shenzhen-Hong Kong financial and modern services development zone. WeChat Payment, the mobile payment solution added to the company’s flagship mobile messaging app in 2013, is a rising star in mobile payments or m-commerce in general as it has enabled businesses to add sophisticated features onto their official WeChat accounts and accept payments there. Even Alibaba felt pressure and now webpages of Taobao/Tall items are disabled to load on WeChat.

It’s not that Alibaba and Tencent became enemies. The two are stakeholders in Zhong An, an online insurance company founded in 2013 together with Chinese insurance company Ping An. Developing products for the online world only, the company released the first insurance product for Taobao retailers in late 2013.

Other Chinese Internet companies are not moving slowly. Baidu, Sina and Netease, by partnering with mutual fund companies, now are selling a variety of mutual funds on their platforms. Both Baidu and Netease subsidize mutual funds to fake high return rates to attract users. It is estimated it won’t take long to have all the financial products be available online. 17 mutual fund companies (THFund isn’t included) set up Taobao stores on November 1st, 2013. Some companies, such as 91jinrong and Rong360, have gone further to take advantage of the trend by building online financial product aggregation service or search engine.

Besides taking advantage of the macro-economic changes, Chinese developers have been working on digital tools for personal finance. Credit card management apps (51zhangdanKaniu), personal finance apps (Wacai) and the like received a lot of funding in 2013.

Tracey Xiang is Beijing, China-based tech writer. Reach her at traceyxiang@gmail.com

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