Meituan Dianping, China's leading food delivery platform, has launched a line of credit feature called "Yuefu (月付)," enabling its users to buy now and pay later.

The new service allows up to 38 days of interest-free loans of up to 1,000 RMB in credit line for purchases made within Meituan's ecosystem, including hotel and flight booking, rideshare, and on-demand delivery services, etc.

The feature has been through smaller scale trials prior to the official launch and found to be popular among the Gen-Z users. The company told media outlets that more than 60% of Yuefu's users are born after the 90's.

The company's data shows users who use Yuefu place 20% more orders and spend 15% more per order on average. Meituan also said that it's seeing usage of the credit line service growing.

Meituan, Hong Kong-listed since 2019, is gradually marching to the promises it made. As early as 2015, the company stepped into internet finance, saying that it is confident to build a financial enterprise with assets of $100 billion, despite group buying and food delivery were the most significant businesses at that time. The company was able to obtain several licenses of financial services, covering online payment, micro-loan, and insurance.

On May 25, the company reported a loss of 1.7 billion RMB in operating loss in the first quarter of this year. The total operating revenue in the first three months fell by 12.6% year-on-year to 16.8 billion yuan. 

The Covid-19 pandemic more or less negatively affected Meituan's income from core businesses such as food deliver and hotel and flight booking, which saw a year-on-year decline. In the meantime, revenues from the new initiatives, including micro-loan, and instant shopping, a 30-minute delivery service, increased by 4.9% to 4.2 billion yuan for the first quarter of 2020.

Currently, Ant Financial, the fintech affiliate of Alibaba, holds a considerable market share in the internet-based line of credit sector. Ant Financial's Huabei credit service can be used on nearly all online purchases with Alipay, the company's mobile wallet product. 

Compared with Huabei, most of Yuefu's transactions are significantly smaller, mainly for food delivery and shared bicycles. But Meituan is counting on hotel and flight bookings, which accounted for 22.9% of the company's total revenue and increased 40.1% to 19.7 billion RMB in gross profit, to boost the growth its new credit facility service.

However, since the consumer finance industry has accumulated various risks while developing at high speed, the overall non-performing rate of the sector is surging. The Chinese government has also tightened its grip on issuing consumer finance licenses, making it hard for Meituan to expand its line of credit service to other use cases.

In addition, the availability of these credit facilities are largely tied to mobile payment methods, of which Alipay and WeChat Pay jointly occupy 90% of the market share and are the first choices when netizens are making payments, a challenging situation for Meituan to advance its agenda.