Late last week, the People’s Bank of China (PBoC) moved to curb the rapid growth of online payments by banning in-person payments made using QR codes, as well as blocking the launch of new ‘virtual’ credit cards. The temporary ban is bad news for Chinese web giants such as Alibaba and Tencent as they battle for dominance in China’s mobile commerce industry.
New regulations are now being drafted that will reportedly set significant limits on spending via online payment services, such as Alibaba’s Alipay and Tencent’s Tenpay (inside China’s WeChat messaging app). According to China’s 21st Century Business Herald (translated by Marbridge Daily), citing unnamed insiders, the central bank has produced draft regulations that state single purchases made on epayment services cannot exceed RMB 5,000 (US$815). Monthly purchases cannot exceed RMB 10,000 (US$1,630). Reuters has confirmed these rumored developments.
New online funds to die an early death?
Any new regulations in this area will severely impact in-store mobile payments, an area where both the Alipay ewallet app and WeChat are fighting to gain an edge. It will also affect ecommerce as a whole in China for consumers who prefer to pay via an online payments platform rather than with a bank or credit card.
China’s new wave of online personal funds will also be hit hard. A number of web companies in the country, such as Alibaba, Tencent, Baidu, and Netease, have started up online fund services as a sort of savings-cum-investment account. These services – such as Alibaba’s Yu’e Bao or Baidu’s Baifa – offer much better interest rates than banks’ timed deposit accounts. A total of RMB 500 billion ($81 billion) has been put into Alibaba’s Yu’e Bao since its launch late last year.
But the rumored new regulations will cripple these online funds. The RMB 10,000 limit on online payments also covers the movement of money into these online funds. It will be difficult for people to move their money to these funds with such a low cap.
China’s online payments industry saw $1.2 trillion in transactions in 2013, according to Beijing-based iResearch.
The PBoC might be trying to stop cross-border money transfers – or even money laundering – via online payment services or online personal funds. Or the central bank might be trying to bolster the traditional banking sector to stop epayment platforms replacing bank and credit cards with in-store mobile payments. After years of fast and largely unhindered growth, China’s web giants are in for a shock.
(Source: Marbridge Daily)
(Editing by Josh Horwitz)