China has plans to tighten the regulations that governs the country’s 270 online-payment enterprises such as Alibaba. This move has come as another blow to the flourishing Internet business for finance.
Under the draft rules issued on July 31, 2015, the central bank is likely to limit the amount that a person can pay online through a third-party payment account to US$805 per day, crossing which, the customer would need to verify his/her identity via an electronic signature and security token. The People’s Bank of China has asked the public to give feedback by Aug 28, 2015. The central bank has imposed strict rule from the previous month on the industry that analysts project to lead to extensive changes and massive failures among the online lenders.
Internet finance has posed a severe challenge to the traditional banks of China and these banks has lobbied for more rules and regulation on the third-party financial payments and the peer-to-peer lending platforms. Some online lenders have helped fuel the stock-market boom that have driven the benchmark index up to 152% in 2015 to June 12, 2015 before crashing.
According to rules of the Friday’s draft, customers, who have at least five methods of verifications have been enabled to open a comprehensive account that is expected to limit the early online or mobile payments to 200,000 Yuan a person. With 3 to 5 verification methods, customers are able to open only one consumption account, which will be having an annual transaction limit of just 100,000 Yuan.
The new rules are aimed at putting an end to the prejudicial advantage of Internet firms to compete with banks as they will be having benefits from the absence of regulation for the capital, provisional, and liquidity requirements, said Mr. Ma Kunpeng, a banking analyst at Sinolink Securities Co, Shanghai