PBOC bans use of virtual credit card
Print Edition
CHINA has suspended the use of virtual credit cards and code scanning payment services by third-party payment companies Alibaba’s Alipay and Tencent’s TenPay over security concerns.
The People’s Bank of China banned the payment companies from providing online payment services for bricks-and-mortar merchants.
Financial institutions are also prohibited from setting up payment accounts with them, the central bank said in a notice.
The PBOC said it is always supportive of innovation in the finance sector but payments via code scanning and virtual credit cards are closely linked to consumers’ personal information and financial safety and therefore need further consideration.
Chinese Internet finance stocks tumbled yesterday after the news.
In Hong Kong, Tencent slumped 4.1 percent to HK$564 (US$72.60), while China CITIC Bank tumbled 6.9 percent to HK$3.94. In Shanghai, the Beijing-based bank plunged 8.3 percent to 4.89 yuan (80 US cents), erasing its previous gains made after announcing the launch of virtual credit cards with Alipay and TenPay.
The PBOC said proper and safe level of risk control for code scanning payment must be in place because the security of customer information and money is involved.
It also said further study is required to define service providers’ obligations in verifying customer identity and protecting personal information of the virtual credit cards.
Zhu Lei, professor at Shanghai Advanced Institute of Finance under Shanghai Jiao Tong University, said: “I think Internet finance has developed too fast. The suspension imposed by the central bank is not a bad thing.”
Zhu warned that network security for virtual credit cards and code scanning payment should not be neglected.
Hua Ming, analyst at consumer financial service company Bankrate Inc, also urged improvements in security and risk prevention because virtual credit card is the future trend.
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