Chinese Regulators Demand Improved Payment Services For Foreigners

March 13, 2024
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A number of Chinese regulators have launched a new campaign to “optimise” payment services for foreigners in China, with Alipay being one of the first local firms to respond.

A number of Chinese regulators have launched a new campaign to “optimise” payment services for foreigners in China, with Alipay being one of the first local firms to respond.

Last month, the State Council, the Central Committee of the Communist Party of China (CPC) and the People’s Bank of China (PBOC) held joint meetings on payments service optimisation.

Among the key issues discussed were financial exclusion of China’s elderly population and foreign visitors to China.

While China’s elderly population struggles to access cash and find merchants that will still accept it, foreigners in China struggle to use their usual payment methods, due to lack of acceptance among Chinese merchants.

The meetings that took place in February resulted in a new "Opinions" document being issued in March by the General Office of the State Council.

Serving as China’s Cabinet, the State Council is responsible for developing high-level planning and strategy across multiple sectors — in this case payments, finance and technology.

The State Council’s "Opinions on Further Optimising Payment Services and Improving Payment Convenience" is 2,000 words long and lays out actionable steps for China’s banks and payment service providers (PSPs) to implement.

Its six “main tasks” for banks and PSPs are as follows:

1. Improve bank card acceptance

2. Optimise cash use and acceptance

3. Improve convenience of mobile payments

4. Protect consumers’ right to payment choice

5. Improve account-level services

6. Promote payment service options in key locations

The State Council noted that the PBOC will lead on overall coordination and implementation across stakeholders, including supervision through a system of “overt and covert” visits to key areas.

The central bank will also publish specific work plans and supporting measures at a later date, which will clarify the timetable and roadmap of the optimisations.

Zennon Kapron, founder and director of Kapronasia, said the move to encourage use of foreign payment cards is a relatively low-risk way of increasing spend and GDP in China, which the country is “sorely in need of” at the moment.

There will be challenges in terms of improving point of sale (POS) terminals and ATM coverage, however, given that Chinese consumers have mostly leapfrogged these technologies.

Instead, firms will be expected to strike a balance between maintaining these technologies and innovating in the mobile payments space.

Finally, Kapron said it will be interesting to see what measures the PBOC puts in place to ensure the success of the directive.

“The role of the PBOC in supervising this initiative, with its approach of ‘overt and covert’ visits and guidance, may indeed face challenges in consistency and effectiveness,” he said.

“Ensuring compliance and smooth implementation across a country as vast as China is no small feat, but the involvement of the PBOC signals the government’s commitment to the initiative.”

Alipay quick to respond

Alipay was among the first local PSPs to respond to the regulators’ directive shortly after it was published.

In a statement shared with Vixio, Alipay’s parent company, Ant Group, announced two changes that will complement the PBOC’s goals.

First, Ant Group will raise the single transaction limit for international users of Alipay from $1,000 to $5,000.

Second, the annual cumulative transaction limit for international users will be raised from $10,000 to $50,000.

Both of these changes are in line with PBOC recommendations.

Alipay app upgrades for foreign users

The new changes will apply to both the Alipay app and the Alipay+ partner programme.

Using the Alipay app, international visitors to China can bind an overseas debit or credit card to their account to “pay like a local”.

This allows users to make payments by either scanning a merchant’s Alipay QR code, or by presenting their own QR code that can be scanned by the merchant.

As of 2023, international cards from Visa, Mastercard, Discover, Diners Club, JCB and UnionPay International can be linked to an Alipay account.

In addition, international users of Alipay can now use the app for a range of translation services.

This allows Alipay users to translate merchant information, such as product listings, within the Alipay app.

In a promotional video shared by Alipay, a Western visitor to China uses the Alipay app to translate a restaurant menu after scanning a QR code, and to translate travel information when booking train and flight tickets.

During Chinese New Year 2024, according to data from Alipay, there was a 500 percent increase in spending via international cards on the app in mainland China compared with 2023.

Travel to China is also expected to increase in 2024 thanks to new visa-free policies and efforts to increase the number of international flights.

Alipay+ partnerships continue to expand

Alipay’s second option for international travellers who want to make mobile payments in China is to use an Alipay+-enabled digital wallet from their home country.

This option is the preferred one among travellers from East and Southeast Asia, where card penetration is significantly lower than in Europe, North America and Japan.

Use of Alipay+ services is also growing rapidly, thanks to an increasing number of partner wallets.

As of February 2024, there were ten Alipay+ wallets from seven countries that can be used to make payments at more than 80m merchants in China.

These are: AlipayHK (Hong Kong); MPay (Macao); Hipay (Mongolia); Changi Pay and OCBC Digital (Singapore); Touch ’n Go eWallet (Malaysia); Kakao Pay; Naver Pay and Toss Pay (South Korea); and TrueMoney (Thailand).

AlipayHK, Touch ’n Go eWallet and Kakao Pay were the first three e-wallets to be enabled, and in a six-month period in the leadup to the Hangzhou Asian Games in September 2022, their combined transaction volume grew 47 times over.

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