Chinese mobile payment platforms Alipay and WeChat Pay have started allowing users to withdraw money online through credit card cash advances by cooperating with some banks, such as Bank of Ningbo, China Everbright Bank and Ping An Bank.
Industry experts said the move would help increase the number of credit cards in use, make credit card users more active and increase the business volume of banks. They also called for more efforts to strengthen monitoring of the use of funds after the withdrawal.
The new feature is currently being tested on a limited scale. The amount of money that can be withdrawn from banks and at what interest rate is determined by the banks, and Alipay and WeChat Pay will provide the service for free, according to the platforms’ service agreements.
Funds withdrawn from customers’ credit cards can only be transferred to debit cards linked to their e-wallets. Additionally, Chinese regulators prohibit cardholders from using cash withdrawn from credit card accounts to make debt payments or financial investments.
Dong Ximiao, Chief Researcher at Merchants Union Consumer Finance Co Ltd, said, “Large Internet platforms with a huge number of users will help increase card usage frequency and keep credit cards active.
The latest move is also a result of rules recently announced by the China Banking and Insurance Regulatory Commission to further promote the growth of sound credit cards, Dong added.
The CBIRC said in July that the number of credit cards for which no transactions have been initiated by cardholders for more than 18 consecutive months and whose current overdraft balance is zero should not exceed 20% of the number total number of credit cards issued by a bank at any time. Banks exceeding the limit will not be allowed to issue new credit cards.
“What deserves regulatory attention is that it is difficult for banks to monitor the flow of money withdrawn from credit card accounts, which means that cardholders can violate regulations on the use of these funds,” he said.
“Users often withdraw money from their credit cards through ATMs or bank-operated apps. The new function launched by electronic payment companies will further diversify the product portfolio of third-party payment platforms and enhance user engagement,” said Wang Pengbo. , senior analyst at market consultancy Botong Analysys. He added that more efforts should be made to monitor how money withdrawn from online credit cards is used.
Some banks have seen lower revenue from their credit card business due to a slow recovery in consumption in China from the COVID-19 outbreaks earlier this year. It also led to the latest cooperation on online cash advances between some banks and major internet platforms, Dong said.