Developments in Chinese Mobile and E-Payments

The year end is seeing many potentially significant developments in mobile and electronic payments in China. Several of these developments are noted below.

Forthcoming Standards: Lu Shuchun, deputy chief of Science and Technology Division of the People’s Bank of China (PBOC), has announced that mobile payment standards would be announced soon. PBOC will then sanction pilot programs applying these standards.

The background is that, starting in 2009, China UnionPay and China Mobile promoted different standards for mobile payment technologies. In April 2012, PBOC, in collaboration with more than 40 interested parties including commercial banks, China UnionPay and mobile communication operators, formed a team for drafting common standards. In June, China UnionPay and China Mobile signed a payment business cooperation agreement, whereby they will jointly work out NFC standards that will apply in China and also be compatible with international standards. We will report further when the PBOC standards are announced.

Alipay App: On December 10, 2012, Alipay began testing the “Kabao” app on Android and IOS platforms. “Kabao” is a virtual purse for the management of accounts and e-coupons. It can contain multiple bank cards.

Competition in E-Banking: Warring over market share, Chinese banks have been rolling out new products and sharply cutting fees. For instance, China Construction Bank has launched a service whereby bank card holders can make micropayments using their cell phones, without other registration with the Bank. Meanwhile, the Agricultural Bank of China, China Everbright Bank, ICBC, China Construction Bank, Bank of China and China Merchants Bank have been cutting their fees for electronic banking transactions. The market has become highly competitive, and further price-cutting should be expected in the new year.