China’s central bank mulls Alibaba, Tencent payment curbs

March 25, 2014 Leave a comment

China’s central bank mulls Alibaba, Tencent payment curbs
8:26am EDT
BEIJING (Reuters) – China’s central bank is considering regulations that would significantly limit the size of payments made through Chinese Internet firms including Alibaba Holding Group and Tencent Holdings Ltd.

The People’s Bank of China released draft rules last week to major banks for consultation, state media reported on Monday. The draft rules restrict single purchases using third-party payment accounts to 5,000 yuan ($810), with a monthly limit of 10,000 yuan.
They also include a ban on the companies from handling offline transactions, currently in the purview of a government-controlled monopoly, and a limit on transfers from bank accounts to accounts managed by the companies.
China’s online and mobile payment transactions have been growing at a frenetic pace. The online payment market last year increased by 47 percent to 5.37 trillion yuan ($869.20 billion)in transactions, according to Beijing-based consultancy iResearch.
That has fuelled a clash between the financial sector and Internet companies as online firms push into banking and ramp up their own financial services, offering online payment options and wealth management products.
“We have reported our opinions to, and are in close communication with, the PBOC,” said an official with Alipay, Alibaba’s payment platform. “Given that the document is now under consultation, we are not able to comment further.”
On Tuesday Tencent released a statement from Tenpay, its payment affiliate which also runs wealth management investment platform Licaitong.
“These draft (regulations), which are in the phase of soliciting public opinion, have not been officially put into effect yet,” the statement said.
“Tenpay has already sent its feedback to the PBOC and will keep actively communicating with the PBOC.”
The statement added that Licaitong investments would not be affected by the regulations, because they are purchased with a bank card and not through a third-party payment system.
A central banker who helped draft the new proposals told Caixin Media that the new rules were intended to limit the operating scope of third-party payment companies to online shopping, while prohibiting offline payments.
In February, Alipay said it handled 900 billion yuan in mobile payment transactions from more than 100 million users last year, completing more mobile payments than U.S.-based PayPal and Square Inc combined.
Alibaba and Tencent both said recently they would launch virtual credit cards that use QR codes, similar in function to a bar code, scanned by smartphones to process payments, in partnership with China CITIC Bank Corp.
But last week, the central bank suspended the use of this type of payment by mobile devices, halting the rollout.
The draft rules also would restrict one-time money transfers through individual third-party payment accounts to 1,000 yuan, with a cap place on the cumulative annual transfer of 10,000 yuan.
Alibaba said on Sunday it had picked the United States for a long-awaited initial public offering, ending months of speculation about where it would float and dealing a blow to the Hong Kong stock exchange.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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