Business / Markets

PBOC suspends use of virtual credit cards

By He Wei and Jiang Xueqing (China Daily) Updated: 2014-03-15 08:04

Alibaba's 'Leftover Treasure' hits 43m users

Such mobile payment systems may displace debit cards and, more importantly, skirt services long monopolized by State-backed bank card processor China UnionPay Co Ltd, said market watchers.

"UnionPay typically takes a fee from every offline transaction. But when payment is made via QR codes, it is essentially cut out of transactions and its interests are severely dampened," according to a research note from China International Capital Corp.

The central bank order will deal a heavy blow to the online-to-offline strategy of many brick-and-mortar retailers, said analysts from Shenyin & Wanguo Securities Co Ltd.

The central bank said it will support the development of new forms of online finance but keep a watchful eye on them and prevent them from "crossing legal red lines", said Vice-Governor Liu Shiyu in February.

"There is a possibility that regulators simply want to rule out potential security issues with the QR code thing because it does have certain loopholes," said an IT specialist with China Mobile Communications Corp who declined to be named.

One problem may be that user information encoded in a barcode can be easily encrypted, he said. A merchant's barcode can be easily amended by a simple barcode generator and linked to a phishing site, posing huge security threats.

Phishing is an e-mail fraud method in which the perpetrator sends out a legitimate-looking e-mail in an attempt to gather personal and financial information from recipients. Typically, the messages appear to come from well-known and trustworthy websites.