China issues banking rules to strengthen online payment security

SHANGHAI Fri Apr 18, 2014 12:35pm IST

A man talks on the phone as he surfs the internet on his laptop at a local coffee shop in downtown Shanghai November 28, 2013. REUTERS/Carlos Barria/Files

A man talks on the phone as he surfs the internet on his laptop at a local coffee shop in downtown Shanghai November 28, 2013.

Credit: Reuters/Carlos Barria/Files

Related Topics

Stocks

   

SHANGHAI (Reuters) - China will limit the amount of money consumers can transfer to third-party online payment platforms, aiming to protect banks and consumers from fraud amid an explosion of online and mobile payment transactions.

Banks will be obliged to limit how much money an individual can transfer to platforms such as Alibaba Group Holding's Alipay per transaction or on a single day, based on the person's financial status, showed a document issued by the central bank and banking regulator.

Lenders such as the Industrial and Commercial Bank of China Ltd already limit transfers to Alipay to 50,000 yuan ($8,000) per month, in part to slow deposits leaving for high-yielding money-market funds such as Alibaba's Yu'e Bao.

But by June 30, all banks must be prepared to implement transaction limits and also establish a means of verifying consumers' identities when they link their accounts at third-party payment platforms to their bank accounts.

"The requirements governing the establishment of business relations between commercial banks and third-party payment institutions are aimed at strengthening management of such business," the regulators said in the document.

"They are also put forward to protect the safety of commercial bank clients' information, funds and bank accounts and maintain the clients' legitimate rights."

The document from the People's Bank of China (PBOC) and China Banking Regulatory Commission (CBRC), dated April 3, was reported by the official Shanghai Securities News on Friday and published in full on the website of China Business News.

It comes at a time absent of any obvious increase in online fraud, and the rules do not contain more draconian measures that local media reported were under consideration, such as limiting individual transfers to 5,000 yuan or a monthly total of 10,000 yuan.

ONLINE BOOM

China is set to overtake the United States as the world's largest online retail economy this year, according to consultancy McKinsey, after online and mobile payments rose 47 percent last year to 5.37 trillion yuan ($863.48 billion), showed data from Beijing-based consultancy iResearch.

The surge has fuelled a clash between banks and internet companies who are pushing into financial services such as online payments and wealth management products.

Funds under Alibaba's Yu'e Bao nearly tripled to 541 billion yuan over the three months ended March, according to a quarterly earnings report released late on Thursday by Tianhong Asset Management Co, an Alibaba affiliate which manages Yu'e Bao funds.

Alibaba rivals Tencent Holdings Ltd and Baidu Inc offer similar money-market funds and payment services. This week, Baidu launched a new mobile wallet application.

Reuters previously reported that the China Banking Association was lobbying for restrictions on online financial products that would reduce the outflow of traditional bank deposits into wealth management products linked to third-party payment platforms.

Among other measures announced in the authorities' document, banks will have to set up virtual private networks (VPNs), firewalls and other dedicated channels to prevent the third parties from accessing the banks' internal data.

Banks must also analyse clients' ability to sustain risk before letting them make payments through third parties, and conduct real-time supervision of clients' third-party payment activity.

"Commercial banks must include their third-party payment business in overall risk control mechanisms," the central bank and regulator said in the document.

($1 = 6.2190 Chinese Yuan)

(Editing by Christopher Cushing)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Canada Shooting

Canada Shooting

Attack on parliament, killing of soldier stun Canada's capital.  Full Article 

Earnings Season

Earnings Season

Wipro sees rosier end to year as U.S. clients spend.  Full Article 

Business Climate

Business Climate

Fears for tough penalties grow as India cleans up business  Full Article 

New Email Service

New Email Service

Google launches new email service dubbed "Inbox".  Full Article 

DLF Appeals

DLF Appeals

DLF seeks interim relief from capital market ban  Full Article 

Falling Oil Prices

Falling Oil Prices

Indian consumers respond to softer oil, food prices  Full Article 

Book Keeping

Book Keeping

RBI fires warning shots on companies' lack of FX hedging.  Full Article 

Policy Repo Rate

Policy Repo Rate

Most external members suggested rate cut in RBI's Sept review.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage