CITIC Bank shares suspended
Following reports that authorities in China are bearing down on mobile phone payment systems, shares in CITIC Bank (China Citic Bank Corp) were suspended in the Hong Kong stock exchange after plunging 6.9%, and falling 8.3% in Shanghai.
Other tech companies also saw their share prices fall steeply. Alibaba declined by over 6% and China’s largest internet company, Tencent, fell by 4.1%.
Early last week, CITIC Bank had announced plans to partner with two companies to issue virtual credit card-based QR code payments (bar-code images which are utilized to transmit payment details, URLs and other data).
These types of payments are typically done by scanning a bar code with a mobile phone or tablet.
Mobile payment market growing rapidly
Alibaba, Tencent and Baidu, China’s three Internet giants, have been investing heavily in businesses and technologies that utilize the scanning of QR codes with mobile devices. There are over 500 million tablet and smartphone users in China today.
China reported a 700% increase in the mobile payment market in 2013, reaching 1.22 trillion yuan’s ($199 billion) worth of transactions.
According to consultancy McKinsey, China will surpass the US as the largest online retail economy worldwide in 2014.
The People’s Bank of China, the country’s central bank, has been pushing for a halt in QR code payments, stating there are serious security concerns regarding their verification procedures.
Tencent said in a statement:
“We have received the letter on the respective payment business and are currently communicating with PBOC (People’s Bank of China) on this. We will fully cooperate with PBOC and submit the materials as required.”
According to officials in China, a pilot program has been launched in which newly-launched privately-owned banks will work with Tencent and Alibaba.
Suspension likely to be short-lived
Experts believe the suspension of any new service in China will probably be temporary, as the country’s central bank assesses some security issues.
As Chinese Internet companies expand and become more diverse, they have started to clash with the country’s finance sector. Internet companies today offer their own financial and online payment services.
Reuters quoted Yi Huanhuan, deputy director at Hong Yuan Securities Research, who said “This is a milestone in the innovation of China’s Internet finance. The ways the Internet is used has already reached the ‘meat’ of the core business of traditional banking institutions.”