China’s central bank proposed stricter rules that will limit the daily amount consumers can pay from accounts with Alibaba’s Alipay, Tencent’s Tenpay, and other online payment companies.
The draft rules have stirred public criticism for taking away convenience consumers have long enjoyed. Hu Xiaoceng of ICS filed this report for CCTV.
New regulations cap daily online purchasesChina's central bank proposed stricter rules that will limit the daily amount consumers can pay from accounts with Alibaba's Alipay, Tencent's Tenpay, and other online payment companies.
The rules will set caps on payments processed by third-party payment companies, with a daily limit of 5,000 yuan per consumer per day, and 200,000 yuan per year. That applies to payments made without identity authentication, which means virtually all payments made on mobile phones. According to research company Mintel, that could affect about 96% of Chinese online shoppers who have used mobile payments in the past. Still, many users appear unconcerned.
According to the central bank, 71 percent of users made online payments totaling less than 1,000 yuan for all of 2014. It shows that the caps won’t influence most users. In fact the caps will be set only on cash prepaid into users’ online accounts, meaning the money stored on the third-party platforms themselves.
The caps will not affect payments made directly from users’ bank accounts, even though those accounts may be linked to the third-party platforms. Payments from bank accounts will not be limited. Internet finance consultancy Yingcan Group says online payments have become an 8 trillion yuan market, almost 13 percent of China’s entire GDP. This has raised regulators’ concerns about possible money laundering.
Many people suspect that the rules aim to curb the online payment sector, which is not quite true. The main purpose is to promote healthy development of the Internet finance industry based on system stability and fund security concerns. The booming Internet finance sector including P2P lending has expanded the business of online payment companies. Diversified businesses and products have attracted and pooled a large amount of money. If that money is misused, it could endanger the entire financial system.
Zhang says the proposed rules also indicate regulators’ desire to educate users about the potential risks of using online payment services. Regulators are struggling to make sure people understand the difference between small online payments and larger, traditional banking transactions. Some users are already showing caution over online payments.
Both Alipay and Tenpay declined to comment on the new regulations. Matthew Crabbe at Mintel says consumer education is not only something for the regulators, but is also important for the online payment companies themselves.
China has nearly 300 online payment companies, though Alipay and Tenpay occupy almost 70 percent of the market. All are expected to feel the impact of the new regulations. Public comment closes August 28.
E-commerce expert Will Tao comments on the impact of the regulations
Will Tao is the Analysis Director of iResearch and has something to say about regulating online payments.