Outrage as China mulls limiting online payments to US$800 a day, except through state-owned banks

A draft regulation released by China's central bank that could limit transactions with third-party payment providers like Alipay to as little as 1,000 yuan (US$160) may wipe out smaller firms and force people to use state-owned bank services.

The proposed regulation, announced on Friday, could greatly shake up China's 8 trillion yuan (US$1.28 trillion) third-party online and mobile payments market.

Third-party payment services that have two or more security measures but do not provide verification processes will have a daily 5,000 yuan (US$800) transaction limit per user. Payment services that offer less than two security measures will have a daily transaction limit of 1,000 yuan (US$160).

Payment providers which utilise digital certificates or signatures in their security measures will not be limited. Internet banking transactions are also unaffected.

Smaller third-party payment services may come under great pressure if the regulations are implemented, due to the increased operational costs of implementing multiple security measures.

According to a report by Barclays, the move will lead to increased consolidation, strengthening the position of major players like Tencent and Alibaba, whose Alipay service already controls a commanding 50 per cent market share.

The move also greatly favours state-owned banks, flying in the face of previous moves to encourage competition in the industry by releasing a select number of private banking licenses.

According to a survey by the Legal Network Public Opinion Monitoring Centre, around 60 per cent of respondents expressed concern that the new rules will make online payments more difficult.