AliPay, WeChat Pay Team up with Banks to Trial Credit Card Cash Advances

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Chinese digital payments giants AliPay and WeChat Pay have launched small-scale trials for the usage of credit cards for online cash advances.

According to a report from Diyi Caijing (第一财经) the two platforms have already teamed up with a number of banks to undertake small-scale trials that will enable consumers to obtain cash advances with their credit cards from AliPay and WeChat Pay, instead of via bank ATMs or bank mobile apps.

Domestic analysts say the move will adds another channel of access for banks, and be of benefit to increasing consumer activity as well as transaction volumes.

Many Chinese banks already permit customers to use their credit cards to obtain cash withdrawals or electronic cash advances via ATM’s and mobile apps, with the cash advance ceiling usually set at 50% of the total credit quota.

“Credit card cash advances are a function that have in actuality always been around, it’s just that previously it was used more with ATM machines and online banking apps,” said Wang Pengbo (王蓬博) a financial sector analyst with Botong Fengxi (博通分析).

“It’s a new function for Internet platforms, and is essentially an ancillary method that can help increase online usage of credit card cash advances, providing both traffic and purchase channels.”

Other industry observers said that the cash advance trials show the difficulties facing the credit card sector in China.

“Even though the pandemic is easing, it’s still having considerable impacts on economic recovery, household consumption and loan repayments,” said a source from a municipal commercial bank.

“At the same time public consumption demand still awaits recovery, so credit card operations face considerable pressure.”

Wang Pengbo further points out that Chinese regulators will be highly concerned about the use of online credit card cash advances for fraudulent purposes, including money laundering or restricted investment.

For this reason banks will likely need to increase scrutiny of use of funds by credit card holders, in order to satisfy regulatory requirements.