China Central Bank Limits Third-Party Online Payments
The People’s Bank of China (PBOC) published a set of guidelines designed to clamp down on online payments.
Released last Friday, the group proposed transaction limits of up to $805 per day and $32,000 per year; depending on the level of security measures the third-party processor has in place.
For payments beyond the standard thresholds, individuals are required to send the money through a commercial bank. Online payments though PBOC-backed institutions, such as China UnionPay, will not be affected by the draft regulations.
“It’s not even enough to buy one iPhone. If I want to donate yuan 210,000 to the Winter Olympics, I guess I’d have to spread it over two years,” said Yi Huanhuan, secretary-general of IFC1000, an online finance trade group.
“Basically this blocks off the industry’s space for development.”
The guidelines also aim to prevent establishments in the industry from opening accounts with third-party payments platforms to discourage risky online lending and other unconventional financing practices.
Officials say the draft will keep consumers safe from security breaches and personal conflicts. The limitations were formulated based on survey information of Chinese consumers’ average spending on such apps.
Chinese brands affected by the new regulations include Alibaba (Alipay) and Tencent (Caifutong). The two currently dominate the online payments sector, which is expected to reach $1.9 trillion before the year closes, according to data from iResearch.
“The measure won’t make online payment less convenient than before. It mainly aims to prevent a payment platform operator from absorbing public deposits and protect the safety of users’ money,” highlighted Independent finance commentator, Chen Yu.
The PBOC started announcing new regulations for internet financing last month. Activities such as crowd funding, peer-to-peer payments and online lending were covered in the controversial framework.