New China Online Banking Rules

Welcome To New China Online Banking Rules!

New China Online Banking RulesNew laws, online banking rules, in China aimed at protecting banks and consumers from fraud a midst an ever-growing tide of online and mobile transactions will limit the amount of money that consumers can transfer to third-party payment platforms.

Lenders like the Industrial and Commercial Bank of China (Ltd) already limit transfers to certain third party platforms like Alipay. Currently, the ICBC limits those transfers to 50,000 yuan a month (roughly $8,000 USD). This move, in part, designed to slow deposits leaving the bank for higher yielding investment opportunities such as Alibaba’s Yu’e Bao. By June 30, 2014, all banks must be prepared to implement similar transaction limits, as well as establishing some verification mechanism for consumer identities when they link their accounts to these third-party platforms.

Online Banking Boom

Later this year, China will likely surpass the United States as the world’s largest online retail economy. This, in no small part to the explosion of online payments in China, which rose a staggering 47% last year, to 5.37 trillion yuan (roughly $863.5 billion USD). Such sudden, explosive growth has created tensions between Chinese banks and internet companies that are pushing into financial services.

Reuters news agency has reported previously that the Banking Association of China was lobbying for regulations and restrictions designed to reduce the flow of deposits into online alternatives linked to third party platforms. Among the numerous specific measures announced comes the pronouncement that banks will be required to establish VPN’s (Virtual Private Networks), firewalls, and other such infrastructure in order to prevent third parties from accessing the banks’ proprietary, sensitive data.

Additionally, banks must also perform at least some level of credit analysis before allowing their customers to make payments via third parties, and conduct real-time supervision of all third party payment activity.

“Commercial banks must include their third-party payment business in overall risk control mechanisms,” the central bank and regulator said in the document provided.

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