China Blocks Plans for Virtual Credit Cards
China’s central bank has put a stop to virtual credit cards, citing security concerns in the verification process of these products.
The bank also stopped payments via Quick Response or QR codes, according to the Chinese state press agency Xinhua.
Alibaba was set to launch more than 1 million virtual credit cards in March. Tencent, a Chinese portal company, was also prepared to introduce these cards this month.
“A lot of the credit risk calculation is based on data provided by Tencent and Alibaba, so the central bank might be worried about their models,” said Wang Weidong, an analyst with IResearch in Shanghai. “The [People’s Bank of China] could be worried about payment risks involving QR codes.”
The central bank is currently looking for ways to better regulate online finance to protect consumers.
The virtual cards would have allowed consumers to make purchases through Alibaba under a loan-like payback system. Credit lines were to start as low as 200 yaun ($33).
Companies will have to work with the central bank to provide better means of monitoring their financial platform now and in the future.