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).
READ MORE: China's digital economy faces mindset challenge with Li Keqiang's internet push at odds with new online payment regulations
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.
Since Friday, many Chinese internet users have taken to Weibo and other social media to express their outrage that they might be limited in how they use third party payment services.
“So now we can’t decide for ourselves how much of our own money we would want to spend?” said one user.
Amid the backlash, the central bank said on Saturday that users who wish to make transactions over 5,000 yuan can use internet banking to foot the excess amount.
The essence of the regulations is to limit third-party payment services to small transactions, and ensure that large transactions go through the banks, according to Barclays.
In 2014, third-party online payment services such as Alipay and Tencent's Tenpay processed 8 trillion yuan (US$1.28 trillion) of transactions, according to market intelligence firm iResearch.
"[The proposal] is aimed at having better controls and governance of third-party online payment channels ... it is not targeted at controlling online shopping," the Barclays report said.
Under the proposed rules, third-party payment services will also be prevented from providing financial services such as deposits, loans, financing, or currency exchange services to users.
This would have a major effect on the fintech market, including services such as Alibaba's Yuebao, which allows users to generate interest on the amount of money they deposit in their Alipay wallets.
Alipay's credit loan product Huabei, which offers loans between 1,000 and 30,000 yuan for online purchases, may also be impacted.