Central bank protects online transactions, prevents risks
New central bank trial regulations on QR code payments will have little effect on consumers, but online payment providers must meet requirements to prevent financial risks, industry insiders said on Thursday.
The People's Bank of China (PBOC) moved to better regulate QR code payments by requiring all non-banking payment institutions to obtain permits from the clearing house of the PBC or other legally permitted houses, according to the central bank website.
A QR code is a two-dimensional matrix of a black and white pixels, widely used for online payments in China.
Payment institutions have been told to improve their management of barcode payments, abide by the real-name registration system for sellers and improve management of risks arising from transactions.
"The rules for barcode payments, interbank transactions and clearing are much improved," Kang Lin, deputy secretary-general of Payment & Clearing Association of China, told the Global Times on Thursday.
QR payments are designed for small transactions, and to make life easier for consumers. As a result, the PBC has set various daily transaction limits for different payment institutions in accordance to their level of perceived risk.
In the face of rapid growth, QR payments need to be better controlled, especially after a recent spate of QR scams. The guidelines take effect on April 1, 2018.
The practice of replacing a legitimate code with a fake code is widespread. When a customer scans the fake code, money is sent to a recipient other than the vendor, Beijing-based Legal Daily reported in May. Fake code can also be embedded with viruses which steal the user's personal information .
In 2016, QR code payments hit 650 billion yuan ($100 billion), according to Beijing-based iResearch.
Penetration of QR code payments was 1.9 percent last year.
The central bank has now set thresholds for different payment scenarios. For those who use static barcode payments - when the vendor has a QR code on display and the customer scans it to pay - the daily transaction threshold is 500 yuan.
"This will have little impact on consumers," said Dong Ximiao, executive president of the Hengfeng Bank Institute.
"The threshold is specifically for the QR codes of vendors, not for consumers. If you spend more than 500 yuan on dinner, just ask cashier to scan the dynamic QR code on your phone, which is much safer," he told the Global Times on Thursday.
Major online payment platforms in China - Alipay and Tenpay - have welcomed the new guidelines.
"We agree with the central bank's regulation of QR codes and we are studying the document," Alipay told the Global Times on Thursday.
Alipay, backed by Alibaba Group, accounted for 55 percent of third-party online payments in the fourth quarter of 2016, according to the iResearch report.
And its rival Tencent Holdings' Tenpay accounted for 37 percent.
"We are collecting opinions from consumers and sellers, and exploring the feasibility of new technology in QR payments," Tenpay said on its WeChat account.
Fair competition
Some payment institutions have used cross-subsidy strategies to gain larger market shares.
Cross-subsidy strategies mean that profits from the sale of one product are used to offset losses on another product, and have led to disorder in the market, according to the PBC.
Alipay and Tenpay ran "cashless campaigns" this summer to encourage customers and vendors alike to use third-party mobile payment tools, domestic online financing and loan services .
During Alipay's "cashless city week" from August 1 to 8, users received coupons and awards when using their Alipay accounts in physical stores.
Tencent ran a "cashless day" on August 8, and sent out hongbao (red envelopes containing cash) to encourage shoppers to pay online.
"Neither dumping below cost nor cross-subsidies will not be allowed," Dong said.
"Technically, those awards and incentives may be part of a cross-subsidy. However, if the amounts are sufficiently small, they can be overlooked," he pointed out.
