China said to stop Tencent and Alibaba from offering virtual credit cards
As the Chinese government ramps up its efforts to increase restrictions on web-based financial products, a source told Bloomberg News that the People's Bank of China has stopped Tencent Holdings Ltd and an affiliate of Alibaba Group Holding Ltd from providing virtual credit cards to its clients.
The Chinese central bank has said to have notified its branches in Shenzhen and Hangzhou to stop the use of virtual cards. The person added that payments operations that relied on Quick Response codes were also blocked because they posed risks to safety. The source spoke on the condition of anonymity because of the confidentiality of the information, the report said.
There are 618 million Web users in China and Tencent, Alibaba and Baidu Inc are trying to outdo each other in providing these users with online financial products. Alipay.com, an Alibaba affiliate, and China Citic Bank Corp intended to roll out a million cards bearing a CNY 200 or $33 minimum credit limit next week. The bank was also set to make more cards available with Tencent and Zhongan Online Property & Casualty Insurance Co, the report said.
Shanghai-based Internet consultant IResearch Analyst Wang Weidong told Bloomberg News in an interview, "The PBOC could be worried about payment risks involving QR codes. As for the credit cards, a lot of the credit risk calculation is based on data provided by Tencent and Alibaba, so the central bank might be worried about their models."
Wang added that they PBOC could change its mind and allow the use of virtual credit cards, which would give customers the opportunity to purchase goods on online retail platforms on credit, after a thorough evaluation has been conducted and regulations tightened. PBOC Deputy Governor Li Dongrong said earlier this month that the central is looking into ways to come up with regulations related to web-based finance, the report said.