China’s Central Bank Proposes Curbs on Third-Party Payments, Halts Product Rollouts (March 17, 2014)
China’s central bank last week released draft rules that would limit the use of third-party payment systems, including the payment operations of Alibaba Holding Group and Tencent Holdings Inc. The proposed rules would ban such payment companies from handling offline transactions. The People’s Bank of China also blocked a plan to allow payments by scanning a QR code on a mobile device, halting the rollout of new virtual credit cards from Alibaba’s Alipay division and Tencent. The People’s Bank of China cited security concerns in a notification sent to the two companies, asking for further information about the new products and their cardholder verification procedures. Each company planned to launch virtual card accounts this month to enable customers to use their smartphones to pay at the POS with a QR code and online without a QR code on Websites supporting China CITIC Bank Corp. credit card payments, as well as Tencent’s and Alibaba’s own platforms.
Alibaba separately announced it plans to pursue an initial public offering in the U.S. Alibaba is China’s largest e-commerce company. Analysts suggest Alibaba will file a $15 billion IPO, valuing the company at more than $100 billion. Alibaba ran into regulatory hurdles when it attempted to go public in Hong Kong. The company reportedly also is interested in pursuing public status in China. China has 500 smartphone users, and analysts project China will overtake the U.S. this year as the world’s leader in online retail sales.