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China Orders Mobile Balances to be Held by State Bank

China Orders Mobile Balances to be Held by State Bank

Mobile payments providers in China will have their interest revenue slashed by a new government mandate requiring all prepaid funds to be deposited at the country’s central bank from 2019.

Currently, only around 50% of these funds are in accounts at the People's Bank of China, with the rest held at private institutions.

The PBOC is now moving to place tighter regulations on the use of customer funds, aimed at combating fraud and lowering risk. It recently put an upper limit of CNY500 ($75) on daily mobile payments.

Alibaba and Tencent provide the two largest mobile payment platforms in the market, Alipay and WeChat Pay. Neither is obliged to pay customers the interest on their balances – which is earned at an estimated rate of around 1.5% - so they retain it for themselves.

With an estimated 500 billion yuan ($75.3 billion) in balances, this translates to interest revenue of 7.5 billion yuan annually between the two firms.

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