Editor’s Note: For luxury brands looking to sell in China, taking advantage of the country’s vast mobile payment system is a crucial strategic component. However, as payment giants Alipay and Tenpay struggle to keep within legal regulations, international companies are approaching with caution. This story originally appeared on Jing Travel, our sister site.
Alipay is in hot water again and has been fined 4.12 million yuan ($601,860) by Chinese authorities for violations of cross-border transaction regulations. The fine is not a major issue for Ant Financial (operator of Alipay), as it is still a relatively modest sum for the company. However, it highlights how these two major mobile payments platforms are struggling to keep within regulations, especially given the increasingly international nature of Chinese mobile payments platforms. No details were given by regulators for this latest fine.
This follows similar violations that led to 600,000 yuan fines for both Alipay and Tenpay, operated by Tencent. The exact nature of the violations is unclear. Tenpay was accused by the State Administration of Foreign Exchange of mishandling the payments of clients, while Alipay was accused of offering unauthorized cross-border payments.
In April, Ant Financial was fined 180,000 yuan by the People’s Bank of China for “inadequate customer rights protection, publishing misleading advertising and improper data protection.”
Moreover, in recent months there have been allegations that WeChat Pay (the WeChat-integrated version of Tenpay) and Alipay have been utilized in Vietnam for tax evasion by leveraging the platforms’ ability to facilitate foreign-exchange transactions.
Unfortunately for both mobile payments platforms, as they become more internationally useful, their usefulness in facilitating illegal transactions also grows. It’s not clear what steps both platforms need to take to reign in such behavior.
While both platforms are primarily used for basic consumer transactions, their functionalities allow them to function similarly to major banking systems. Arguably, mobile payments as a whole should have to control capital flows across borders in a similarly rigid fashion that traditional banks do.
It’s undoubtedly a frustrating situation for both Tenpay/WeChat Pay and Alipay’s operators, who are both keen on making their platforms as useful as possible for Chinese tourists abroad, as well as providing increasingly robust financial services at home.
While increased restrictions on the usage of the platforms for forex transactions may be necessary, it may result in restrictions that reduce the ability of Chinese tourists to make payments on wholly legal and innocuous travel goods and services. In all likelihood, balancing the need to regulate platform misuse and facilitating global expansion will remain a challenge for both Alipay and Tenpay for years to come.
Alipay and Tenpay weren’t the only platforms caught in violation of state regulations. Gopay.com.cn and Union Mobile Financial Technology (UMF) were fined a total of 72.9 million yuan. According to Caixin Global, their violations were “failing to verify transactions, providing services for unidentified users, and violating rules of capital reserve and cross-border money transfer.”
These two platforms cater to very different users, which may explain why their fines were so much higher than those of Alipay and Tenpay. Gopay.com.cn is in fact backed by the China International Electronic Commerce Center, a Chinese government agency. The platform’s primary clients are state and corporate bodies.
UMF is backed by both China Mobile and UnionPay, and has a more consumer-oriented focus than Gopay.com.cn and caters in large part to e-commerce merchants. However, the company as a whole has stronger connections to more traditional financial institutions. According to the company’s website, UMF’s payments platform also provides “‘capital management cloud’ service for professions such as internet, e-commerce, travel, chain supermarket in mall, online loan, banking, operators, drink, and software.”