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The People’s Bank of China (PBOC) demanded that Alipay, Tenpay, and other online payments solutions funnel mobile payments through a newly established clearinghouse by June 2018, a move that could hurt the wallets, reports the Financial Times.
Once transaction data flows through a clearinghouse, it’s possible that banks and other parties will be given access to the information the wallets currently hold, which is usable for credit scoring and targeted marketing.
With $8.8 trillion flowing through Chinese mobile wallets in 2016, according to iResearch, the clearinghouse move may wrest vast stores of valuable transaction data from the wallets’ grasp.
The move to a central clearinghouse will curb money laundering — and perhaps more importantly, hurt Alipay and Tenpay.
- On the surface, sharing info will help the PBOC prevent crime. Currently, when authorities investigate suspected money laundering taking place on mobile wallets, they must seek out payment processors individually for transaction information. But soon authorities will be able to easily turn to one central source — the clearinghouse — for this information. The PBOC has previously indicated that money laundering was an issue on wallets: In May, Caixin reported the central bank was fining Alipay and Tenpay for not taking adequate steps to prevent money laundering.
- More importantly, this could be an attempt to constrain Alipay and Tenpay. Together, the two companies run a duopoly over mobile payments in China, with 91% of the market, according to Analysys. The central bank may be attempting to shift power away from the wallets and back to banks. Tensions between the mobile wallets and the PBOC, which issues and administers the yuan, have been simmering — days ago it criticized Ant Financial’s cashless week promotional activity for “interfering with the normal currency flow of the yuan,” Quartz reported.
It could also hurt Alipay’s parent company Ant Financial in its bid for MoneyGram. US lawmakers have sought to hinder the company’s bid to acquire legacy remittance firm over concerns that Ant Financial could not protect US consumers’ data from prying eyes. This instance of Chinese transaction data being stripped from Ant Financial could weaken the company’s claim that they can protect MoneyGram’s data from the Chinese government and other outside forces.
BI Intelligence, Business Insider's premium research service, has compiled a detailed report on mobile payments in China that:
- Forecasts and compares mobile payments volume, in-store mobile payments users, mobile payments volume per capita, and mobile commerce penetration in China and the U.S.
- Overviews the key competitors in China's mobile payments market, and how new entrants may shuffle the hierarchy of dominant players.
- Uncovers the key drivers propelling China's mobile payments market.
- Identifies which drivers the U.S. can import from China, and which barriers may be standing in the way.
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