China will limit the amount of money consumers can transfer to third-party online payment platforms, aiming to protect banks and consumers from fraud amid an explosion of online and mobile payment transactions.
Banks will be obliged to limit how much money an individual can transfer to platforms such as Alibaba Group Holding’s Alipay per transaction or on a single day, based on the person’s financial status, showed a document issued by the central bank and banking regulator.
Lenders such as the Industrial and Commercial Bank of China already limit transfers to Alipay to 50,000 yuan ($8,000) per month, in part to slow deposits leaving for high-yielding money-market funds such as Alibaba’s Yu’e Bao.
But by June 30, all banks must be prepared to implement transaction limits and also establish a means of verifying consumers’ identities when they link their accounts at third-party payment platforms to their bank accounts.
“The requirements governing the establishment of business relations between commercial banks and third-party payment institutions are aimed at strengthening management of such business,” the regulators said in the document.
China is set to overtake the US as the world’s largest online retail economy this year, according to consultancy McKinsey, after online and mobile payments rose 47% last year to 5.37 trillion yuan ($863.48 billion), showed data from Beijing-based consultancy iResearch.
The surge has fuelled a clash between banks and internet companies that are pushing into financial services such as online payments and wealth management products.
Funds under Alibaba’s Yu’e Bao nearly tripled to 541 billion yuan over the three months ended March, according to a quarterly earnings report released late on Thursday by Tianhong Asset Management, an Alibaba affiliate that manages Yu’e Bao funds.
Alibaba rivals Tencent Holdings and Baidu offer similar money-market funds and payment services. This week, Baidu launched a new mobile wallet application.