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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 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.

 

Concardis, a payment service provider, has announced that it will support Alipay payments in Austria and Switzerland.

 

In Austria, Gössl is the first merchant that allows Chinese consumers to pay using their smartphones with the Alipay app. The clothing brand will start by supporting the app in 20 stores in Austria and plans to extend the service to seven other stores in Germany.

 

Concardis also intends to launch the Chinese payments app in Switzerland by October 2017. The first integration will take place with jewellery merchants like Wempe, TOD’s and Timberland.

 

The payment service provider has already managed to launch Alipay in Germany, where the payment method is accepted at several hundred store locations. Most recently, football club Borrusia Dortmund, which has a large fan base in Asia, has implemented the Chinese payments app in its souvenir shops.

 

Payment solutions provider GHL Systems has partnered Alipay to offer Malaysian in-store merchants and online merchants an alternative payment option.

 

The service rollout is set to start with the in-store merchants before the end of April 2017 and will eventually be extended to ecommerce merchants.

 

GHL had started its partnership with Alipay in 2016 in Thailand, which allowed both sides to familiarise themselves with the operational methodology. To-date, GHL Thailand has enabled over 600 merchant acceptance points with various chain stores in the hotel, retail and food and beverages space.

 

In 2016, Malaysia had received 26.8 million tourists, including 2.1 million tourists from China, contributing close to RM82.1 billion in revenues, The Star reports.

 

GHL provides integrated payment solutions encompassing physical and virtual payments on sale and rental basis, including Electronic Data Capture (EDC) terminals compliant to the Europay-Mastercard-Visa (EMV) platform, contactless readers, network access routers, and online payment gateways.

 

 

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.