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China to Cap Mobile Payments Despite Public Backlash

March 27, 2024         By: David Mindich

China’s central bank, The People’s Bank of China received some serious backlash from both consumers and mobile payment firms like Alibaba Group and Tencent after announcing its plans to cap mobile payment transaction amounts on Monday. But while the outcry was enough to get China’s central bank to notice, it wasn’t enough to get them to change their mind, now saying they may revise the amount they cap mobile payments based on public opinion.

While the PBOC vaguely pointed to limited business risks as their reasoning for the move to cap mobile payments, it seems likely that this is an attempt to curb the impressive amount of money being transferred from Chinese banks to mobile accounts.

Alibaba was 2013’s most successful mobile payment platform, and, combined with Tencent, have been responsible for tens of billions in online deposits through online investment platforms. Between their ease of use and the fact that they can offer significantly higher returns than traditional banks, China’s banks are losing a lot of consumers to these online platforms.

According to the Wall Street Journal, China’s central bank intends to cap mobile payments at 10,000 yuan per month. Over the weekend, China Construction Bank joined a list of other major banks to limit the amount of money consumers can transfer onto mobile products, capping them at 5,000 yuan per transaction (50,000 per month) for Alibaba and 10,000 yuan per transaction (50,000 monthly) for Tencent.

Late last month, the China Banking Association also began lobbying on behalf of China’s banks to introduce a limit to how much interest consumers can make on deposits made to online money market funds.

Just two weeks ago, the PBOC temporarily banned payments by QR code in anticipation of Alibaba and Tencent’s virtual credit card launches, citing consumer protection and concerns over fraud risk.

The amount of regulatory issues now hitting China’s mobile payment companies comes at a particularly bad time for Alibaba, which is preparing to list an IPO in the US that had potential to be one of the largest filings since Facebook. How these recent changes will effect their filing is yet to be seen.