Business / Markets

PBOC suspends use of virtual credit cards

By He Wei and Jiang Xueqing (China Daily) Updated: 2014-03-15 08:04

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She added further studies are needed to assess the security of such services and that the central bank has a responsibility to regulate new business models.

Tencent confirmed to China Daily that it has received the notice and is "closely negotiating" with the bank.

Alipay had "no comment" on the move when approached by China Daily on Friday.

But an Alipay official who declined to be named said in China many policies in relation to finance tend to protect the interests of "bulky stakeholders", namely State-backed banks.

To expand digital transactions, the Internet companies both announced on Tuesday they will allow "payment by credit" for users of third-party payment processors.

Both firms are partnering with mid-sized lender China CITIC Bank International Ltd and Zhong An Online Property Insurance Co, a joint venture co-invested by the pair along with Ping An Insurance (Group) Co of China Ltd, the world's second-largest insurer.

Following the move CITIC Bank's stock dropped 8 percent on Friday before trading was suspended. Tencent's shares were down about 4 percent in Hong Kong at the close of trading on Friday. Its market capitalization has more than doubled in the past year, a partial reflection of market confidence in its robust online finance business.

The financial sector in China has been shaken up in the past two years as Internet firms entered the arena by offering online saving funds with higher returns and online-to-offline payments.

Unlike physical credit cards, the virtual credit service will be bundled with users' Alipay or Tenpay accounts, allowing companies to assess customers before issuing lines of credit.

The time taken for the approval process by Alipay is significantly lessened to just one minute, bolstered by data analysis from the company's huge user base with its approximately 300 million customers in February.

Tencent's mobile chat app WeChat had more than 600 million users by the end of 2013. By scanning barcodes embedded in the respective mobile apps WeChat and Taobao Wallet, users can purchase items from brick-and-mortar stores using their smartphones.