Central Bank Bans Use of Barcodes by Payments Sector for Securities Business

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The Chinese central bank is cracking down on the use of barcode technology technology by payments companies to covertly engage in other forms of financial activity.

The central bank issued the “Notice of the People’s Bank of China Concerning the Issuance of the ‘Barcode Payment Business Standards'” (Yinfa [2017] no. 296) 中国人民银行关于印发<条码支付业务规范>的通知) alongside the “Barcode Payment Security Technology Standards” (条码支付安全技术规范) and the “Barcode Payment Acceptance End Terminal Technology Standards” (条码支付受理终端技术规范), which are slated to come into effect on 1 April 2018.

The new measures stipulate that “payment companies cannot engage in or covertly engage in securities, insurance, lending, financing, wealth management, guarantee, trust, currency exchange, cash deposit or deposit and withdrawal business on the basis of barcode technology.”

An official from PBOC said that the release of the new measures had been prompted by the rapid growth of barcode payment operations across China in recent years, which have enjoyed continuous growth in market share and become a key form of mobile payment due to advantages including a low threshold for entry and high convenience of usage.

The official said that barcode payment technology and operations risk possess distinctive features compared to traditional bank card payments, leading to the emergence of problems amongst certain market participants including “chaotic and unfair competition and failure to properly prevent payment risk.”

According to the official PBOC will “guide the Payment and Clearing Association of China in arranging for market entities and specialist scholars to undertake ample investigation into the relevant problems of barcode payment as well as reach a high-level of common consensus, and research and formulate corresponding operation and technical standards.”

“On the basis of security considerations, we will require that banks and payment organisations implement even stricter amount restriction administrative measures during the usage of static barcodes, in order to encourage market entities to adopt safer dynamic barcodes when providing payment services.”

 

 

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