China plans to tighten regulations governing the nation’s 270 online payment firms, including Alibaba Group Holding Ltd’s (阿里巴巴) finance arm, dealing another blow to the booming business of Internet finance.
Under draft rules published on Friday last week, the central bank is to limit the amount an individual can pay online to 5,000 yuan (US$805) per day through third-party payment accounts, unless the customer’s identity can be verified by a security token and electronic signature. The People’s Bank of China is seeking public feedback by Aug. 28.
The central bank last month imposed stricter rules on the industry, which analysts expected to lead to sweeping changes and failures among online lenders.
Internet finance is posing a rising challenge to China’s traditional banks, which have lobbied for more regulation of third-party payments and peer-to-peer lending platforms. Online lenders helped fuel a stock market boom that drove the benchmark index up 152 percent in the year to June 12 before crashing.
According to Friday’s draft rules, customers with at least five methods of verification can open a so-called “comprehensive account,” which limits annual online or mobile payments to 200,000 yuan per person. With three to five verification methods, a customer can only open a “consumption account,” with an annual transaction limit of 100,000 yuan.
The new rules are to put an end to the “unfair advantage” of Internet companies in competing with banks, as they have been benefiting from the absence of regulation for capital, liquidity and provision requirements, Sinolink Securities Co (國金證券) Shanghai-based analyst Ma Kunpeng said in a note on Saturday.
The third-party payment industry might consolidate following the new rules, China International Capital Corp (中金公司) analysts Mao Junhua (毛軍華) and Sarah Tian wrote in a note published yesterday.
“Strict client identification and transaction verification will demand more technological investments and imply more challenges for irregular players,” the note said.
Third-party payment companies that have the licenses to operate online lenders, such as Alibaba’s Ant Financial Services Group (螞蟻金服) and Tencent Holdings Ltd (騰訊), are to have an edge over other players that are not allowed to offer full financial services through third-party payment accounts, the analysts wrote.
Ant Financial’s MYbank and Tencent’s WeBank are among a wave of new private banks being licensed by the government to target small loans and aim to use facial-recognition software to let users set up accounts.
The rules on third-party payment accounts followed measures imposed last month on China’s more than 2,000 peer-to-peer financing Web sites. Internet finance firms must park all client funds at established banks and must obtain approvals from financial and cyberspace regulators, the central bank said on July 18.
The sites must also provide sufficient disclosure and send risk reminders to customers, it said.
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