Tencent is planning to join China's student loan service by investing in online student loan startup Fenqile. (Photo : www.news.xinhuanet.com)
Tencent Holdings Ltd. is holding talks with a startup that lends money to students, as the Internet giant plans to invest and broaden its reach into financial services, the Wall Street Journal reported.
Fenqile, meaning "happy installments" in Chinese, is a startup that runs a shopping site that caters to college students, lending them money to buy goods and pay back the loans in monthly installments, the report said.
Tencent plans to take part in Fenqile's investment round, which is valued at around $1 billion. It is still not clear how much Tencent would invest or how much money will be raised, according to sources.
The report said that Ant Financial led a $200-million investment round for Fenqile's competitor, Qufenqi, in August.
Although online consumer-finance transactions tripled to 16 billion yuan ($2.5 billion) last year, the online segment is small, in comparison with the overall consumer-credit market in China, according to iResearch.
Fenqile, which is based near Tencent's headquarters, in Shenzhen, was founded by a former Tencent manager in 2013.
Its investor is online shopping company JD.com Inc., which holds a minority stake in Tencent.
Fenqile buys goods from JD and sells them to students.
Fenqile's venture-capital investors include DST Global, which led the startup's $100-million funding round last year; Matrix Partners China; Bertelsmann Asia Investments; and China Renaissance K2 Ventures, the report said.
Analysts said that student loans could be an attractive area for big Internet players because these services entice young consumers to get into the habit of online borrowing, while the companies collect their credit data.
"When those students graduate and get jobs, they will have a lot more buying power," iResearch director Will Tao said.
