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Alibaba and Tencent hit by China's new mobile payment rules

Mandate to deposit funds at central bank will slash interest income

Alipay operator Alibaba Group generates income from unused prepaid funds by collecting interest from private banks and offering loans through smartphone apps. (Photo by Koji Uema)

SHANGHAI -- Alibaba Group Holding and other mobile payment providers in China stand to lose significant interest revenue when the government requires that all prepaid funds they receive from users be deposited with the central bank rather than private institutions.

The People's Bank of China has told payment services that 100% of such customer funds must be placed in specified accounts by 2019. Only about half is done so now, but the proportion is set to rise incrementally from this month.

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