China’s central bank has put a stop to plans by Alibaba and Tencent to launch virtual credit cards, as well as mobile payments that use handsets to scan QR codes, both moves that increase the bank’s control over online financial products.
The two firms had planned to launch their cards to one million customers each, with Alibaba launching as soon as next week. Both were in partnership with China’s Citic Bank.
Observers advanced several reasons for the crackdown.
“The PBOC (People’s Bank of China) could be worried about payment risks involving QR codes,” said Wang Weidong, an analyst with Shanghai-based consultant IResearch, who was interviewed by Bloomberg.
“As for the credit cards, a lot of the credit risk calculation is based on data provided by Tencent and Alibaba, so the central bank might be worried about their models.”
The central bank might relax its rules after a review, said Wang.
The bank might also want to protect China UnionPay, the country’s government-backed card issuer, which takes a fee on every transaction that flows through its system.
Payment made via QR codes and mobile phones bypasses China UnionPay’s system, so depriving it of revenue, which might have prompted the bank to take a closer look.