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China’s central bank has ordered online payment groups to operate through a centralized clearing house, a move likely to undercut the dominance of Ant Financial and Tencent by forcing them to share valuable transaction data with competitors.

 

China is the world leader in mobile payments, with transaction volumes rising nearly fivefold last year to Rmb59tn ($8.8tn), according to iResearch. They are now widely used for everything from high-street shopping to peer-to-peer lending. 

 

In addition to generating fees directly, online and mobile payments are a source of valuable data that can be used for such purposes as targeted advertising and credit scoring. 

 

Now the People’s Bank of China is requiring all third-party payment companies to channel payments through a new clearing house by next June, according to a document sent to payment companies on August 4 and seen by the Financial Times. 

 

“The launch of this clearing house is a one-sided loss for the payment institutions. Originally, payment data were proprietary information for them. Now it’s connected to the clearing house, which will probably share it with other partners,” said Zhang Yi, fintech analyst at iResearch, a consultancy.

 

Ant Financial, the financial services affiliate of Alibaba Group, is the market leader in mobile payments, with its Alipay unit processing 54 per cent share of all transactions in the first quarter of the year, according to iResearch. WeChat Pay, linked to Tencent’s mobile messaging app, held a 40 per cent share. 

 

Mr Zhang believes the central bank wants to aid commercial banks in obtaining customer data and prevent Alipay and Tencent from gaining excessive market power. 

 

Hundreds of millions of Chinese consumers and businesses have linked their Alipay or WeChat Pay accounts to their commercial bank accounts, enabling third-party payments to be credited and debited seamlessly. 

 

But, unlike swiping a bank card, when an Alipay or WeChat user makes a purchase, banks do not obtain crucial payment details such as the merchant’s name and location. Instead, the bank record shows Alipay or WeChat as the recipient. 

 

Currently, payment groups maintain separate bilateral relationships with commercial banks to facilitate payments to or from users’ bank accounts. But the latest PBoC instructions require all payment companies to connect to the clearing house by October 15 and to channel all payments through it by June 30, according to the document. 

 

“We are actively participating in the preparation work and will complete the adjustment according to the requirements of central bank,” Ant Financial spokesman Anna Wang told the FT. 

 

The PBoC and Tencent did not respond to a request for comment on Wednesday. 

 

Seven units of the PBoC own 37 per cent of the clearing house, known as the Online Settlement Platform for Non-Bank Payment Institutions, according to Caixin, a financial news website. Payment units of Ant Financial and Tencent each own 9.6 per cent, while 36 smaller third-party payment companies own the remaining equity. 

 

Established last year, the clearing house has capital of Rmb2bn. It began testing in March and around 300 commercial banks are already connected. 

 

Beyond data sharing, the new clearing house will also enable the PBoC to monitor online payments directly without requesting data from processors, strengthening their ability to detect money laundering and other illicit transactions. 

 

“Some third-party payment companies have used their licences to create channels for illegal payments. There really is a need to strengthen anti-money laundering and other regulation,” said Wang Pengbo, analyst at Analysys International.

 

Tencent has opened its credit scoring system to limited group users on QQ, WeChat’s older sibling.

 

This marks a big step forward for Tencent:  not only does this fill in a glaring gap in their product lineup, it also puts them in direct competition with Alibaba’s Sesame Credit.

 

According to previous screenshots from early testers, the credit scores—ranging from a maximum of 850 points and a minimum of 300 points—were calculated from five indexes: social connections, security, wealth, the ability to honor an agreement, and consumption behavior.

 

Social data constitutes a major part of Tencent Credit’s rating system. The data collected from WeChat and QQ—which claim 900 million and 860 million monthly active users respectively. The consumption data was mainly gathered through Mobile QQ and WeChat payment.

 

Tencent is also partnering with financial institutions like WeBank, China Construction Bank and local service institutions for complementing the credit rating mechanism.

 

Both Alibaba and Tencent have set early sights on the credit scoring sector, an essential component for financial services to solve the rising online security issues by leveraging big data. In 2014, when Alibaba’s Ant Financial was tinkering on Sesame Credit, Tencent also laid out in the sector with plans to launch a similar product. Both the companies obtained government approval to run their consumer credit rating services two years ago. 

 

Tencent has applied for a license in Malaysia to offer local payment services via its WeChat Pay, reports Reuters.

 

If approved, users in Malaysia will be able to link their local bank accounts to WeChat Pay and pay for goods and services in ringgit.

 

WeChat Pay and Alibaba Group’s affiliate Alipay are turning China cashless by enabling payments or money transfers via code scan.

 

The pair are also expanding internationally in tandem with outbound tourism, getting more businesses to accept their services which allow users to make payments using bank accounts in China without complications posed by currency exchange.

 

Licenses for such cross-border payments differ from those required for local payment services. Hong Kong is currently the only location outside mainland China where WeChat Pay and Alipay offer payment services executed entirely in the local currency.

 

Alipay introduced a separate app for the Hong Kong market in May, its first non-yuan payment app.

 

Alibaba Cloud, the cloud computing branch of China-based ecommerce company Alibaba, has unveiled plans to open data centres in Mumbai and Jakarta.

 

The expansion into Indonesia follows the country’s 1,000 Start-ups Movement initiative to establish 1,000 new ventures by 2020 with a target valuation of USD 10 billion.

 

Alibaba says that both data centres should be up and running during the current fiscal year, which ends on 31 March 2018. The initiative will boost the ecommerce company’s computing resources in Asia and worldwide. The two new data centres will join Alibaba’s global networkwhich currently has 17 locations in mainland China, Australia, Germany, Japan, Hong King, Singapore, the United Arab Emirates and the US.

 

Alibaba entered the cloud computing industry in 2009, three years after Amazon launched its AWS cloud division.

China remains the largest global eCommerce market in terms of trading value, accounting for over 40% of the total transactions.

 

Transactions through eCommerce platforms have reached CNY 26.1 trillion (USD 3.8 trillion) in 2016, increasing by 19.8% from 2015, according to a Sina news report citing data from the Ministry of Commerce.

 

Ecommerce-related services have accumulated a value of CNY 2.45 trillion (USD 357.5 billion) in 2016, growing by 23.7% from 2015.

 

This growing market is sustained by the increasing number of internet users who reached 731 million or 53.2% of the country’s population. Online shoppers account for 467 million, or 63.8% of internet users. Another 441 million use mobile phones to place orders showcasing an annual growth rate of 29.8%.

 

The eCommerce market’s growth in China is due to the fast expansion of Alibaba’s Taobao and Tmall marketplaces and Tencent-backed JD.com platform. The report shows that clothing, electronic appliances, mobile phones, digital goods, food and drink are among the most traded goods on eCommerce platforms.

 

 

Ant Financial, the payment affiliate of Alibaba, has claimed that its number of daily active users doubled in 2016.

So far, the company has not yet disclosed data about the total number of active daily users, but it has reported that over 450 million people use its Alipay service for payments and various financial services like wealth management and insurance.

Launched in 2004, Alipay provides payment services for Alibaba’s ecommerce platform. Currently, it controls 54% of the total market shares, but competitor Tencent has made significant advances in 2016 to secure a wider market share. Now, Tenctent’s WeixinPay has a 37% market share.

Both competitors have expanded their payment services to physical stores. Tencent said that 29% of all in-store Starbucks purchases in mainland China were made through WeixinPay. In a similar move, Ant Financial managed to sign a deal with First Data that could give the company access to a potential 4.5 million merchants in the US. Similar agreements have also been signed in Europe with Ingenico and BNP.

The market has been expecting on an IPO from Ant, valued at USD 60billion at its last funding round in 2016, but it is currently off the agenda, at least until the end of 2018, the Financial Times reported.

Alipay to launch in the US

By on May 12, 2017

 

Alipay, the mobile payment system offered by Alibaba, has announced is coming to the US, thanks to a deal brokered with First Data.

The expansion follows limited trials in California and New York, and will bring Alipay into direct competition with Apple Pay, Android Pay, and PayPal. Alongside online payments and money transfers, Alipay users can also hail a taxi, book a hotel, and buy movie tickets directly from within the app.

The partnership will allow Chinese tourists who visit the US to use their mobile phones to complete transactions at 4 million merchants and retailers around the country.

Alipay has about 450 million customers worldwide, but Alipay’s deal with First Data aims to offset the mobile payment’s loss of ground in China.

alibaba-drone

Is drone delivery the future of ecommerce? That’s an open question, but the concept looks to be taking a big blow in China this month, with authorities slated to roll out regulations that will reportedly ban urban drone delivery.

 

Currently, drones exist in a relatively unregulated space in China. But at the General Aviation Development Summit in Beijing last week, China Aircraft Owners and Pilots Association (AOPA) secretary Ke Yuyu revealed that a new set of draft regulations on drones are due to be released this month. These new rules have already been passed by China’s Civil Aviation Administration and are currently in the middle of other approval procedures.
As they stand, the regulations don’t look good for those who were hoping that drones would one day replace China’s fast-delivery bike couriers. Ke says the regulations would require registration and aviation authority approval for drones over 25 kg (55 lbs), and drones capable of carrying cargo or weighing more than 150 kg (330 lbs) would be subject to even more stringent restrictions. But passing those restrictions won’t change things for ecommerce players, because according to Ke the regulations ban drone delivery outright in congested urban areas.

 

These regulations haven’t been formally passed or even released yet, so it’s possible that Ke is mistaken or that the final draft could include changes. Certainly, ecommerce players with plans for drone delivery (like Alibaba) may want to lobby aviation authorities for looser rules. And of course, we still don’t know the specifics, so it’s possible the regulations sound harsher in summary than they are in actuality.

 

Whether they’re as harsh as they sound or not, the new rules likely aren’t a permanent ban. Instead, they’re more of a recognition that drone technology isn’t sophisticated enough yet. In its current state, drone delivery in urban environments could be dangerous due to the high number of obstacles and the high probability of people getting hurt if there is an accident. So while urban drone delivery will be banned for now, it might well be unbanned at some point in the future if authorities are convinced the technology is there to do it safely.