Tencent is to launch a small loans service on its mobile messaging application WeChat, underscoring the company's ambition to expand its reach in the online finance sector. [Photo provided to China Daily]

Internet giant Tencent Holdings Ltd is to launch a small loans service on its popular mobile messaging application WeChat, underscoring the company's ambition to expand its reach in the country's booming online finance sector.

Huang Liming, vice-president of Tencent-backed Internet bank WeBank, said the company has been testing the service－'Weilidai', which literally means "a tiny bit of loan"－among three million selected users since May.

Without revealing when the service will be launched, Huang told an online finance forum in Beijing on Wednesday that the service will provide loans from 500 yuan to 200,000 yuan ($78-$31,400), without guarantee or collateral.

He hopes to attract 15 million customers by the end of the year, and it will be targeted at young consumers and small business owners.

Successful applicants are likely to receive money in just a few minutes, much faster than gaining credit from traditional banks. WeBank will be able to access credit records of users through data collected on social networking platforms and traditional bank account information.

Analysts said they expected Weilidai to directly challenge the credit card business of traditional banks, by offering lower interest rates, most likely at a daily rate of around 0.05 percent, with repayments spread up to 20 months.

Tencent's rival, Alibaba Group Holding Ltd, already launched a similar service earlier this year, with a daily interest rate of 0.045 percent over 12 months.

By July, WeBank figures showed it had extended more than 800 million yuan in small personal loans to its customers.

The sudden rise in online finance businesses has become a major challenge for the country's financial regulators.