(Yicai Global) June 30 -- Chinese internet giant Tencent Holdings said it will not impose a service charge on payments made with its WeChat Pay at university-run facilities on college campuses after universities objected.

Tencent will continue to not charge a service fee on payments made in consumption settings operated by universities themselves, the Shenzhen-based firm’s instant messenger WeChat announced late yesterday, adding that the plan to introduce a 0.6 percent charge was ill thought out.

Northwest University in Xi’an, Nanjing University of Science and Technology, and others informed staff and students that they had decided to suspend WeChat Pay support for on-campus payments from tomorrow after the payment platform said it would introduce the handling fee.

Tencent decided to levy the charge because of the increasing number of on-campus merchants, with some for-profit vendors squeezing its resources for educational subsidies and thereby driving up Tencent's costs, Zhang Jun, its public relations general manager, said yesterday, adding that no service charge will be imposed on payments made at not-for-profit settings on college campuses.

WeChat Pay's favorable rate for payments made on-campus in for-profit settings is between 0.2 percent and 0.4 percent, according to people familiar with the situation. In comparison, that of Ant Group's Alipay, its bigger rival, is zero.

The cause of the dispute between WeChat Pay and universities is that Tencent has embarked on a huge cost-cutting exercise, an industry insider told Yicai Global. 

Tencent's sales and marketing expenses dropped 13 percent to CNY7 billion (USD1 billion) last quarter from a year earlier, its latest earnings report showed. Its general and administrative costs fell 8 percent to CNY24.6 billion (USD3.4 billion), with its headcount down by 2,000 from the end of last year.

After implementing cost-cutting measures, Tencent's first-quarter net profit rose 10 percent to CNY25.8 billion, while revenue gained 11 percent to CNY150 billion (USD20.7 billion).

Editors: Lv Yining, Martin Kadiev