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PBOC sets new payment rules for Alipay and WeChat
Updated 13:17, 03-Mar-2022
By Wang Siwen
02:49

China is one of the most advanced countries in the world in terms of mobile payments. As these businesses grow, regulators have tightened restrictions on the fintech sector to check risks and ensure financial safety.

A set of new payment rules for Alipay and WeChat Pay took effect on March 1. The rules set by the People's Bank of China (PBOC) are designed to distinguish between business and personal transactions for better regulation and prevent financial crimes.

A PBOC notice emphasizes a distinction between personal and business collection codes – anyone using a payment platform in a way that looks a lot like a business should use a merchant barcode than an individual one to receive payments.

Another thing is the restriction on personal static collection barcode, which is prohibited in principle for remote non-face-to-face collections for most cases.

"WeChat Pay and Alipay have 90 percent of the market share of this kind of transactions ... they have very strong hold of mobile payments," said Ilaf Elard, assistant professor of economics at New York University (NYU) Shanghai.

According to the iResearch, the value of transactions made through QR codes – both merchant and personal – hit 10.8 trillion yuan (about $1.7 trillion) in the second quarter last year.

Meanwhile, nearly 100 million small and micro business owners in China use individual QR codes on Alipay and WeChat Pay to handle payments, according to China International Capital Corp. Ltd. And some have taken advantage of the lax oversight. 

"If you do not use a business license or business QR code, the problem could be there's financial crime, money laundering, tax evasion and other loopholes that individual merchants might make themselves subject to. And the streamlining of fintech sector means that China can control and make sure the financial system is safe, and it is not relying only on private companies like WeChat and Alipay to make the financial system safe," Ilaf said.

"The biggest obstacle to the central bank's implementation of this policy is the general public's lack of understanding, especially for individual business owners such as vegetable vendors and merchants. Such merchants may think that there are extra charges in upgrading the personal collection code to 'special merchant collection code,' or worry that the collection method will be changed, thus negatively affecting the operation," said Rui Meng, a professor of finance and Accounting at CEIBS.

Some vendors and owners of mom-and-pop stores are a bit worried. A vendor named Tang said, "Before I just used my QR code to receive money, it's something I'm used to. We don't really know much about this new code, we haven't seen anything about it and don't know how to operate it."

According to the latest announcement, users who occasionally use QR codes to collect small-sum payments will not be subject to business tax or tighter rules, but offered the option of upgrading to a business one.

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