Alipay has had contracts with numerous branches of ICBC for negotiated corporate deposits, and could place deposits with the branch offering the highest yield.
The recent decision of the bank in question means that ICBC branches will no longer be interested in offering high yields on Alipays deposits, hitting the online payment businesss revenues from interest.
As a result of a conflict of interests between Chinas traditional finance sector and its internet companies, banks in China have recently been involved in limiting their customers’ transfer volume of money to online finance services and the authorities have been considering the idea of developing regulations to counteract the phenomenon.
The Chinese online payment market grew by 47% to USD 869 billion (CNY 5.37 trillion) in transactions in 2013, according to Beijing-based consultancy iResearch.
Online finance’s problems, according to regulators such as the Peoples Bank of China (PBOC) and commercial banks, revolve around the security of payments made by virtual credit cards and smartphones and risks relating to money laundering and customer information security, as well as the wider financial system.
Other services have drawn the ire of banks, particularly the internet companies wealth management products that have taken the Chinese public by storm and analysts say are contributing to interest rate liberalisation in China.
Banks like ICBC, Bank of China, Agricultural Bank of China and China Construction Bank have restricted how much customers can spend on Alibabas and Tencents online payment services.
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