Alibaba and Tencent’s booming mobile payments businesses could hit a speed bump in China

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China’s $90 billion mobile payments industry might soon face a nasty roadbump.

On Friday the People’s Bank of China issued draft proposal for a new set of laws that could deeply hinder the nation’s booming online finance industry, currently dominated by the web giants Alibaba and Tencent.

As the Chinese tech blog Techweb (link in Chinese) explains, the proposed laws obstruct China’s payment apps in three main ways.

First, online third-party payment providers must prohibit cash transfers between two people. Instead, individuals can only move cash from their third-party wallets to their private bank accounts.

Second, consumers who want to use a third-party online payment provider must provide at least three forms of identity verification upon registering, including but not limited to ID obtained from local police, one’s place of employment, or an education institute.

Most controversially, the People’s Bank of China aims to set a 5,000-yuan (about $800) cap on purchases made through an online payment provider during a single day. It also suggests limiting offline, QR code-enabled payments to 200 yuan (about US$30) a day.

Each of these proposed regulations nips at some of the features that Alibaba and Tencent have trumpeted as they’ve promoted their online finance apps.

WeChat, for example, grew its user base for WeChat Payments through a brilliant “send money to friends” scheme it promoted during Chinese New Year in 2014

Digital finance: you can look, but not touch.
Digital finance: you can look, but not touch.
Image: AP Images/Ng Han Guan

Both WeChat and Alibaba have lightning-fast registration processes, requiring users to merely upload their personal ID information, set a username and password, and bind their bank cards to their new accounts.

As for QR-code payments, while no data measuring its impact exists, Alibaba and Tencent have each worked with malls and convenience store chains to help spur its popularity.

China’s mobile payments industry is massive, with gross merchandise volume hitting 5.9 trillion yuan (about $90 billion) throughout 2014. Most of those transactions occur through Alipay Wallet, an Alibaba-affiliated payments app.

The draft proposal from the People’s Bank of China only heightens the government’s mixed messages towards private internet companies.

On the one hand, premier Li Keqiang has used the term “Internet Plus” as a catch-all phrase for supporting internet companies. These include Alibaba and Tencent’s finance apps, which compete with state-owned banks, as well as Didi Kuaidi, which interferes with city-affiliated taxi industries. But Friday’s draft proposal indicates that these internet companies will face a bleak future if they rub up against precious state-owned enterprises.

Or, there’s the possibility nothing happens. Last year the People’s Bank of China issued an outright ban on QR-code payments. Despite storms of fist-shaking, Alibaba and Tencent persisted and the, so-called ban fizzled.