BEIJING (Reuters) - China’s central bank is considering regulations that would significantly limit the use of third-party payment systems, including the payment arms of 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 measures would ban the payment companies from handling offline transactions.
They would also heavily limit spending by individuals using third-party payment platforms and transfers from bank accounts to accounts managed by third-party companies. The draft rules restrict single purchases using third-party payment accounts to 5,000 yuan ($810), with a monthly limit of 10,000 yuan.
“We have reported our opinions to, and are in close communication with, the PBOC,” said a spokesperson with Alipay, Alibaba’s payment platform. “Given that the document is now under consultation, we are not able to comment further.”
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.
China’s online and mobile payment transactions have been growing at a frenetic pace. The online payment market last year increased by 42 percent to 7.4 trillion yuan ($1.2 trillion) in transactions, according to Beijing-based consultancy iresearch.
That has fueled 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.
Last week, China’s central bank suspended the use of payments made by scanning a type of bar code with mobile devices, halting the rollout of new virtual credit cards by Tencent and Alibaba.
Both companies announced they would launch cards, which can use QR bar codes scanned by smartphones to process payments, in partnership with China CITIC Bank Corp
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, hitting the ability for users to move their money into wealth management products offered by Tencent and Alibaba.
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.
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.
($1 = 6.1502 Chinese yuan)
Reporting by Matthew Miller and Paul Carsten; Editing by John Stonestreet