SHANGHAI — Millions of small-time merchants heaved a sigh of relief as banking authorities withdrew a proposal that would have prohibited the use of personal e-payment accounts for business just one week before it was due to take effect.
WeChat Pay and Alipay, QR code-based payments systems operated by two of China’s largest tech companies, are almost universal in China. Small businesses such as taxi drivers, roadside pancake vendors, and small restaurants frequently use personal accounts to receive payments, avoiding both the hassle of registering as a merchant and fees associated with merchant accounts.
The central bank moved to ban the practice last October, warning that organized crime groups use personal accounts for money laundering. A spokesman for the central bank said last November that gangs pay large numbers of individuals to pose as small merchants in order to move funds secretly. The ban was to take effect March 1.
It’s not hard to get a merchant account. For less than 20 yuan ($3.16), the fee for an official QR code plate, both WeChat Pay and Alipay allow informal businesses to apply for merchant accounts, requiring the owner to provide only a personal ID and pictures of their business.
But a dozen vendors at a Shanghai vegetable market told Sixth Tone that they can’t afford the commissions. While transactions through personal accounts are free, both WeChat Pay and Alipay charge merchants a commission of over 0.6%. They are likely to increase their commission in future.
Some of the merchants said that they had switched to a QR code provided by China Post, whose commission is just 0.25%. The China Post system allows customers to use both WeChat and Alipay.
“The 0.6% would eat into my profit margin, ” Liu Min, a vegetable vendor using a China Post code, told Sixth Tone. “I am glad the policy won’t go into effect.”
The Payment and Clearing Association of China, an industry association affiliated with China’s central bank, wrote in a brief statement Tuesday that “the existing ‘personal payment QR codes’ will not be closed or disabled, and their function will not change,” and merchant accounts will remain voluntary.
Following the announcement, Alipay and WeChat Pay confirmed that they will continue to allow individuals to use personal accounts for businesses, but both urged small businesses to open merchant accounts. WeChat Pay pointed to its analytics services as an advantage to merchant accounts, while Alipay noted that it provides some coverage for disputed transactions.
Editor: David Cohen.
(Header image: A vendor sells vegetables at a wet market in Kunming, Yunnan province, June 11, 2020. IC)
