China mobile money providers face regulatory hit - Mobile World Live

China mobile money providers face regulatory hit

18 JAN 2017

Third party payment providers in China will be hugely impacted by the introduction of national bank regulations covering the use of customer funds, research company TrendForce predicted.

Under new People’s Bank of China (PBoC) regulations taking effect in April, third party payment companies must deposit client reserve funds in state-run accounts which generate no interest. According to China Daily reports, the measures are intended to guarantee customer funds and ensure institutions don’t use the money for “risky” financial services.

Taiwan-headquartered TrendForce estimated the policy will result in third party payment companies including Alipay and WeChat-owner Tencent placing CNY500 billion ($73.1 billion) under central Government management.

The research company predicted the measure will prove to be a major blow to the country’s mobile payment players, which will be unable to use these funds to generate any interest or grow their businesses. In a statement, TrendForce singles out Alipay, which the firm believes will have the main part of its revenue generation strategy invalidated by the PBoC measure.

TrendForce analyst Yvette Lin said: “Reserve funds are money from customers’ accounts that are temporarily placed in the custody of payment companies during the clearing period. Payment companies can [currently] charge interest on these funds or use them to grow their businesses.

“China’s recent regulatory framework will severely curtail the growth of the third-party payment industry as service providers rely on these funds to expand and survive.”

The company also believes a decision announced last week to remove restrictions on the use of 2D barcode scanning in China will further seize the initiative away from mobile payments providers as traditional banks will be able to build their own mobile payment services more easily.

China’s government this week detailed more plans designed to bolster the nation’s telecoms market. At the same time watchdog the Cyberspace Administration of China called for all app stores in the country to be registered to ensure consumers are fully protected.

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Chris Donkin

Chris joined the Mobile World Live team in November 2016 having previously worked at a number of UK media outlets including Trinity Mirror, The Press Association and UK telecoms publication Mobile News. After spending 10 years in journalism, he moved...

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