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China’s central bank has proposed a daily cap of 5，000 yuan （$817） on transactions through third-party online payment systems， in an initiative to raise security protocols.
The New Security Regulation on Thirdparty Payments
China’s central bank has proposed limiting the size of transactions through third-party online payment systems such as Alipay. This is to ensure security for consumers’ information and money.
The amount shoppers would be able to spend through third-party online payment per day may be restricted to between 1，000 yuan and 5，000 yuan， depending on how sophisticated the system’s security checks are.
And consumers whose accounts limit them to shopping payments would be allowed to spend no more than 100，000 yuan a year. It also bans third-party payment platforms from opening accounts for institutions running financial businesses， such as online lending firms.
While platforms that have both digital certification and signature qualification checks will be exempt from the restrictions， the limit would be set at 1，000 yuan per day for platforms that have only one qualification check.
For systems that fail to include digital certification and signature but has two or more checks， the limit would be 5，000 yuan.
When the spending amount exceeds the cap， consumers would be transferred to banking payment platforms to pay the surplus， according to the People’s Bank of China （PBOC）.
A Massive Controversy in China
The new security regulation on third-party payments has stirred massive controversy in China， with critics saying it compromises convenience for the interest of state-backed banks.
The news was a bombshell for Chinese web-users， who have become increasingly reliant on convenient payment services such as Alibaba’s Alipay and Tencent’s Tenpay.
In a survey conducted by news portal Sina， around 60% of the 6，000 interviewees believed their online shopping experience would be affected by the new rules. Some complained that the 5，000-yuan cap would restrict them from buying an iPhone 6 online.
Following the heated debate， the central bank released a second statement explaining that consumers would be transferred to banking payment platforms if they need to spend beyond the limit， making the impact on their spending cap minimal. At first glance， the new policy is likely to create the impression that the central bank is trying to protect the interests of the banking industry as it is increasingly under the attack of the booming Internet finance firms， but analysts point out that transaction security is the major concern.
Transaction Security
The real aim of the policy is to avoid large sums of money depositing in the third-party payment accounts， which are beyond the protection of bank deposit insurance and will leave consumers vulnerable to possible risks， according to Ma Tao， an analyst with research consultancy Analysys International.
In addition to limiting the size of transactions， the new regulation also bans payment institutions from opening accounts for firms engaged in financial businesses such as credit， financing， wealth management and guarantees.
This is in line with an earlier guideline on Internet finance that stipulated Internet finance firms must park all client funds at established banks， effectively closing the door for third-party agencies to be trusted with the funds.
Since the creation of Alipay， China’s third-party payment industry has expanded rapidly. Statistics from iResearch showed China has around 270 agencies owning payment licenses， with a transaction value surpassing 8 trillion yuan in 2014.
With the exception of Alipay and Tenpay， who have made good money selling wealth management products， most third-party agencies have struggled to find good profit models， with some starting to explore services such as parking money for commodity trading， peer-to-peer lending and crowdfunding platforms.
But a string of fraud cases last year underscored hefty risks in the sector， prompting the latest regulation. It is believed that bigger and better P2P firms will benefit from the phase-in of new regulations.
The New Security Regulation on Thirdparty Payments
China’s central bank has proposed limiting the size of transactions through third-party online payment systems such as Alipay. This is to ensure security for consumers’ information and money.
The amount shoppers would be able to spend through third-party online payment per day may be restricted to between 1，000 yuan and 5，000 yuan， depending on how sophisticated the system’s security checks are.
And consumers whose accounts limit them to shopping payments would be allowed to spend no more than 100，000 yuan a year. It also bans third-party payment platforms from opening accounts for institutions running financial businesses， such as online lending firms.
While platforms that have both digital certification and signature qualification checks will be exempt from the restrictions， the limit would be set at 1，000 yuan per day for platforms that have only one qualification check.
For systems that fail to include digital certification and signature but has two or more checks， the limit would be 5，000 yuan.
When the spending amount exceeds the cap， consumers would be transferred to banking payment platforms to pay the surplus， according to the People’s Bank of China （PBOC）.
A Massive Controversy in China
The new security regulation on third-party payments has stirred massive controversy in China， with critics saying it compromises convenience for the interest of state-backed banks.
The news was a bombshell for Chinese web-users， who have become increasingly reliant on convenient payment services such as Alibaba’s Alipay and Tencent’s Tenpay.
In a survey conducted by news portal Sina， around 60% of the 6，000 interviewees believed their online shopping experience would be affected by the new rules. Some complained that the 5，000-yuan cap would restrict them from buying an iPhone 6 online.
Following the heated debate， the central bank released a second statement explaining that consumers would be transferred to banking payment platforms if they need to spend beyond the limit， making the impact on their spending cap minimal. At first glance， the new policy is likely to create the impression that the central bank is trying to protect the interests of the banking industry as it is increasingly under the attack of the booming Internet finance firms， but analysts point out that transaction security is the major concern.
Transaction Security
The real aim of the policy is to avoid large sums of money depositing in the third-party payment accounts， which are beyond the protection of bank deposit insurance and will leave consumers vulnerable to possible risks， according to Ma Tao， an analyst with research consultancy Analysys International.
In addition to limiting the size of transactions， the new regulation also bans payment institutions from opening accounts for firms engaged in financial businesses such as credit， financing， wealth management and guarantees.
This is in line with an earlier guideline on Internet finance that stipulated Internet finance firms must park all client funds at established banks， effectively closing the door for third-party agencies to be trusted with the funds.
Since the creation of Alipay， China’s third-party payment industry has expanded rapidly. Statistics from iResearch showed China has around 270 agencies owning payment licenses， with a transaction value surpassing 8 trillion yuan in 2014.
With the exception of Alipay and Tenpay， who have made good money selling wealth management products， most third-party agencies have struggled to find good profit models， with some starting to explore services such as parking money for commodity trading， peer-to-peer lending and crowdfunding platforms.
But a string of fraud cases last year underscored hefty risks in the sector， prompting the latest regulation. It is believed that bigger and better P2P firms will benefit from the phase-in of new regulations.