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China’s central bank, the People’s Bank of China, has announced plans to regulate the country’s QR code payment system to tackle risks and its limited competition.
The bank issued a trial notice on the issuance of barcode payment services and two accompanying sets of provisional guidelines for code security and payment terminal specifications. All three will come into effect on April 1, 2018. The announcements cover barcodes and QR codes including fixed codes and those generated for a specific transaction.
Safety issues have emerged over barcode payments, particularly over fixed codes typically seen at restaurant counters. These are sometimes swapped by criminals who intercept payments. Setups that create a new code for each transaction are more secure.
The regulations stipulate that payment institutions need a license to offer barcode payment services must be connected to the clearing house of the People’s Bank of China or other legally-permitted clearing houses. Such connections have been proving slow.
Users are not expected to notice any difference, but binding third party payment providers to the clearing system is likely to benefit UnionPay, the official banking payments network. Alibaba affiliate Ant Financial’s Alipay and Tencent’s WeChat Pay virtually have a duopoly on QR-based payments in China and have come under fire for subsidizing the system to win merchants and users, and for encouraging shoppers to spend more with loans. The regulations aim to put an end to subsidies which these companies have used to increase their market share.
Regulations have previously been in place for QR code payments but widely flouted by payment system providers and merchants. UnionPay joined the QR party late, but has recently begun using QR codes as a payment format in Southeast Asia with a partnership with AsiaMalls Management and Bank of China Singapore. It hopes to increase use of its own Mobile QuickPass app, going up against WeChat’s international expansion.