China's banks are limiting the use of mobile payment services

After stellar success over the last few years, China’s financial institutions and banks are imposing limitations on mobile banking and payment usage.

A release by China’s Central Bank today, Monday, mentions plans on limiting the amount that can be spent through mobile payment applications. No full explanation was given as to why the limitations are being imposed. According to the People’s Bank of China (PBOC) the caps are intended to bring down the amount of risk businesses will absorb, but did not specify on what exactly the risks they are planning on reducing.

China has seen overwhelming acceptance of mobile payment solutions. Internet and Ecommerce firms, most notably Alibaba and rival Tencent have been offering a plethora of payment options through their payment applications. From mPOS and digital goods to taxi hailing and vending machines, China’s Ecommerce landscape has become primarily mobile based.

Given the relatively low fees, many of China’s youth are doing away with conventional banking and transferring their funds to these internet based services. Alibaba for example recently waived all fees on the mobile version of its Alipay payment service while hiking up the fees for its desktop based counterpart.

This last Saturday, China’s Construction Bank released a statement mentioning its new limitations. The bank plans on imposing a limit of 5,000 Yuan per transaction—and a total of 50,000 Yuan a month—for deposits to Alibaba's Yu'E Bao fund.

"No one knows who gave the banks the power to hurt depositors' rights to distribute their capital. No one knows who will regulate the legitimacy of the big state banks to join hands and force out Yu'E Bao,” said Alibaba's Jack Ma said in a recent post.

Other issues such as the Central Bank not allowing transactions for payment originating from QR codes to be completed have also been reported. Some feel the new limitations and restriction spawn from a sense of fear of internet and Ecommerce firms coming in to replace traditional banking institutions.

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Image courtesy of Wikimedia