Central bank proposes cap on third-party online payments

According to a Barclays report, the regulation aims at increasing government control of small third-party payment services.

The third-party payment industry might consolidate following the new rules, China International Capital Corp (中金公司) analysts Mao Junhua (毛軍華) and Sarah Tian wrote in a note published yesterday.

Ant Financial sounded an optimistic note, saying in a statement that third-party payment services have played a positive role in promoting inclusive finance and serving small businesses and mass consumers, and that the process has required mutual trust and transparency between companies and regulatory departments.

Third-party payment companies that have the licenses to operate online lenders, such as Alibaba’s Ant Financial Services Group (螞蟻金服) and Tencent Holdings Ltd (騰訊), are to have an edge over other players that are not allowed to offer full financial services through third-party payment accounts, the analysts wrote. “If I want to donate yuan 210,000 to the Winter Olympics, I guess I’d have to spread it over two years”, said Yi Huanhuan, secretary-general of IFC1000, an online finance trade group.

Such payment services have surged in popularity in China, fueled by the proliferation of smartphones and the expansion of mobile-data coverage. Online payments though PBOC-backed institutions, such as China UnionPay, will not be affected by the draft regulations.

Under the proposal, the amount people will be able to spend through third-party online payments per day may be limited between one and 5-thousand yuan, depending on how sophisticated the system’s security checks are.

If payment services from social networking and online entertainment firm Tencent, which backs ecommerce No. 2 JD.com Inc, and search firm Baidu are offered on Alibaba’s e-commerce sites, users could opt to use those.

Late last week, Chinese officials proposed new regulations in an effort to better regulate the country’s Internet sector, starting with new rules related to a wide range of topics, including censorship, cybersecurity and eCommerce, Reuters reported Friday (July 31). Additionally, Internet banking transfers and transactions are exempted from these restrictions. “The victims of this would be the hundreds of millions of users of these services”.