China’s mobile payments groups have benefited by the switch from cash to smartphone payments © EPA
Tencent and Alipay set to lose $1bn in revenue from payment rules
New central bank rules ban online financial giants from investing customer funds.
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China’s two mobile payments giants, Alipay and Tencent, are poised to lose around $1bn in combined annual revenue to a new central bank requirement that third-party payment groups hold all customer funds in reserve.
Chinese mobile payment transactions reached Rmb109tn ($16tn) last year, according to research firm Analysys Mason, as consumers switched to smartphones from cash for supermarkets, taxis, and payments to friends. The platforms are also increasingly used to purchase mutual funds, peer-to-peer loans and other wealth management products.
Ant Financial’s Alipay and Tencent’s WeChat Pay dominate the industry, with market shares of 54 per cent and 39 per cent respectively in the first quarter. Ant Financial is the finance affiliate of Alibaba.
Together the two groups control hundreds of billions of renminbi in customer funds that accumulate on their platforms when users receive payments but do not immediately transfer the funds to a bank account or other investment.
Previously, third-party payment groups were permitted to invest customer funds, much as banks use deposits to make loans and other investments, even though unlike banks, the payment groups pay no interest to users.
Gabriel Wildau
Financial Times
16 July, 2018
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