Mobile Payment Network News: As mobile payment scenarios become more and more important in people’s lives, “digitization” has become an inevitable trend. On August 15, 2020, Baidu Company, Baixin Bank and China UnionPay launched China’s first digital bank card-Baidu Quick Pass Card. Coincidentally, on August 31, the “UnionPay Unbounded Card” released by China UnionPay and Commercial Bank, a mainstream mobile phone manufacturer, key cooperative merchant, and payment institution, also claimed to be the first digital bank card. For a time, there were hundreds of innovations based on mobile payment. Although different innovations all use non-physical media to facilitate customers to operate on mobile terminals, the operating logic and policy requirements behind them are different.

The evolution of personal bank accounts

As technical methods become increasingly mature and risk management and control technologies continue to upgrade, regulatory agencies have begun to open personal bank accounts under the premise of safety. Restrictions are gradually relaxed. This provides fertile ground for account innovation based on mobile payment scenarios.

Personal bank accounts include debit card accounts and credit card accounts. Debit card accounts are divided into categories I, II and III. The starting point of the central bank's establishment of three types of accounts is to manage real-name management and improve the service quality and efficiency of banks. At the same time, it also promotes the innovation of various financial institutions based on personal bank accounts.

(1) Preliminary establishment of the three-category account system

Before 2015, some banks had tried to rely on self-service machines such as remote video teller machines and smart teller machines, as well as electronic services such as online banking and mobile banking. The channel provides personal bank account services. In order to strengthen the real-name management of bank accounts, ensure the security and compliance of banking services, and meet the need to expand the depth and breadth of account services, the People's Bank of China issued the "About Improving Personal Bank Account Services and Strengthening Account Services" on December 25, 2015. "Notice on Management" stipulates that banks should establish a classified management mechanism for bank accounts, which are divided into Class I bank accounts, Class II bank accounts and Class III bank accounts.

Depositors can handle deposits, purchase investment and wealth management products, transfers, consumption and payment, cash withdrawals and other services through Type I accounts; handle deposits, purchase investment and wealth management products, and make limited-amount purchases through Type II accounts. and payment payment services; handle limited-amount consumption and payment services through Class III bank accounts. The single-day payment limit for type II accounts is 10,000 yuan, and the upper limit of the account balance for type III accounts is 1,000 yuan.

In terms of account opening conditions, opening a Type I account requires bank staff to verify identity information on site. Therefore, only Type II accounts or Type III accounts can be opened through electronic channels such as online banking and mobile banking. Type II accounts opened through electronic channels are mainly authenticated by binding the Type I account with the same name as the account opening applicant. The account classification system facilitates financial institutions to conduct Internet business.

(2) The detailed rules for type II and III accounts are gradually clarified

On November 25, 2016, the central bank issued the "Notice on Implementing the Classified Management System for Personal Bank Accounts", which regulates personal accounts. The classification has been supplemented and improved.

This policy facilitates the convenience and possibility for various financial institutions to conduct business through Type II accounts. In terms of convenience, the central bank has added a credit card account as an identity verification method. In addition to Type I accounts, you can also verify customer identity through credit card accounts and open Type II and III accounts. In terms of restrictions, the central bank stipulates that banks can issue their own loan funds to type II accounts and repay them through type II accounts. The issuance of loans and the return of loan funds are not subject to transfer limits. This greatly broadens the scope of use of type II accounts and facilitates various financial institutions to continue to innovate based on bank type II accounts. In particular, the granting of loans and the return of cash are not subject to transfer limits, which has opened channels for the business expansion of consumer finance companies and small loan companies.

(3) The account interoperability mechanism is gradually taking shape

Although regulatory agencies have established a three-category account system, banks lack the willingness to share information. Larger banks have insufficient motivation to open the certification channel for Type I accounts, thereby helping small and medium-sized banks acquire customers through Type II and III accounts.

In response, some commercial banks and China UnionPay have formed their own alliances to cooperate in the alliance.

In May 2017, China UnionPay organized some banks to hold a "Starting Meeting for Interconnection and Cooperation of Bank Class II and Class III Accounts" and established a cooperation mechanism for interconnection and interoperability of Class II and III account businesses. Banks participating in the cooperation achieve interconnection through card binding verification and expand their customer base. The establishment of the cooperation mechanism provides commercial banks with a broader space for business innovation for type II and III households.

(4) Restrictions on Category II and III accounts are further relaxed

In January 2018, the central bank issued the "Notice on Matters Concerning Improving Classified Management of Personal Bank Accounts." The notice further relaxes restrictions on Class II and III accounts.

In terms of account opening channels, this notice requires that by the end of December 2018, commercial banks and other banking financial institutions should realize the opening of accounts at the bank’s counters and online banking, mobile banking, direct banking, remote video teller machines, Smart teller machines and other electronic channels handle business such as opening personal Class II and III accounts.

In terms of account opening restrictions, this notice streamlines unnecessary customer information. For example, when an individual logs in to an electronic channel to open a Category II or III account by using a safe and reliable verification method such as a digital certificate or electronic signature, there is no need for the individual to fill in identity information or produce an identity document when opening a Category II or III account; when an individual opens a Category II or III account; When applying for an account, you can postpone showing your identity document and only need to fill in basic information such as your name, ID number, bound account number and contact information to open an account.

Restrictions on Category III households are further relaxed. The account balance of Type III account increased from 1,000 yuan to 2,000 yuan. At the same time, the bank can issue its own small consumer loan funds to Category III accounts and repay them through Category III accounts. The issuance of loans and the return of loan funds shall comply with the balance limit regulations of Class III accounts, but the return of loan funds is not subject to the withdrawal limit.

(5) Encourage the improvement of services for Category II households

On February 20, 2020, the General Office of the People's Bank of China issued the "General Office of the People's Bank of China on Preventing the New Coronavirus Epidemic" "Notice on Payment and Settlement During the Epidemic Prevention and Control Period", which encourages banking institutions to strengthen online business services, improve service convenience and availability, and improve personal type II account services. It also emphasizes that during the epidemic prevention and control period, banks can effectively prevent and control On the premise of reducing risks and accurately identifying the customer's identity, we will issue wages, subsidies, etc. to customers through Type II accounts.

Encouraged by the regulatory system, financial institutions have further increased innovation based on Type II accounts. The digitization of customer accounts has greatly unleashed the business potential of various financial institutions, and also enabled business innovation to be accumulated in 2020.

Innovative forms based on mobile payment

Financial institutions’ innovations in mobile payment scenarios are mostly focused on credit card accounts and Type II accounts. In terms of credit card accounts, due to regulatory requirements for risk management and control, most banking entities with card issuance qualifications carry out business innovation. In terms of debit card accounts, since the limit and usage restrictions of Type II accounts are smaller than those of Type III accounts, under the same conditions, financial institutions tend to prefer business innovation based on Type II accounts.

(1) Innovation based on Type I accounts

Since Type I accounts are full-function accounts, they can be used for identity verification of other types of accounts. Therefore, some commercial banks have exempted customers from the first credit card interview process through Type I accounts. However, this practice essentially violates the requirements for supervising "three personal visits" and may be stopped at any time in the future.

Judging from the existing information, industrial, agricultural, medium and construction households can apply for credit cards through Category I households, eliminating the need for the first card interview. Customers need to first become a debit card customer of the bank, have a Category I account debit card, open online banking, and have a security certification (ICBC electronic cipher, Agricultural Bank of China K-guarantee, Bank of China e-shield, CCB online banking shield). Users log in to online banking on the computer, apply for a credit card, and pass the bank security certificate authentication. After approval, they can be activated and used directly.

The first credit card interview is exempted through Class I cards, which essentially replaces the regulatory "in-person" requirement through Class I cards + security certificates. Whether this approach complies with regulatory requirements has been controversial. At present, the customer service of ICBC, Bank of China, and Agricultural Bank of China have not clearly stated whether this solution is feasible, but there have been successful cases online. CCB customer service clearly stated that applying for a credit card through online banking does not require an interview.

(2) Innovation based on type II and III accounts

1. Innovation of type II accounts by banking institutions

Convenient identity verification method for type II accounts, It has become the entry point for many Internet banks to acquire customers and conduct business. According to regulatory regulations, opening a Type I account requires bank staff to verify identity information on site, while Type II accounts only need to pass the identity verification online for Type I or credit card accounts. Thanks to this, many Internet banks and direct banks without physical branches can shorten the customer account opening process, reduce account opening time, improve customer experience, and then quickly expand their business while gaining a good reputation.

On December 16, 2014, WeBank was established; on June 25, 2015, MYBank opened for business; on November 18, 2017, Baixin Bank was established. Whether it is WeBank or MYBank, customers need to pass a Type I account or credit card verification when registering before they can open a Type II account. Although overdrafts are not allowed for Category II households, the granting of loans and the return of loan funds to Category II households are not subject to the transfer limit. This facilitates Internet banks to carry out Internet loan business.

On August 15, 2020, Baixin Bank, Baidu, and Bank of China released the “Baidu Quick Pass Card”, which is billed as the first digital bank card in China. In essence, Baidu Quick Pass Card is a card product based on Type II accounts. The application, activation and use of Baidu QuickPass card are all done online. It has functions such as consumption, financial management and transfer. It can be bound to WeChat, Alipay, Meituan, JD.com, UnionPay QR code and mobile Pay for payment. It supports Alipay Huabei. Repayment, but WeChat and Alipay balance withdrawals are not supported. When the balance of Baidu Quick Pass card is insufficient, other bank cards bound by the user can be called for payment. It is worth noting that Baidu Quick Pass Card claims to be a debit and credit card with credit functions. However, regulatory requirements require that Category II households are not allowed to have overdraft functions. Baidu QuickPass Card actually cooperates with Baixin Bank's consumer credit product - "Haohuihua". After the user applies for a loan, "Haohuihua" will transfer the funds to the Baidu Quick Pass card.

In terms of operating model, Baidu Quick Pass Card is different from traditional Internet banking Class II cards such as WeBank and MYBank. Baidu QuickPass Card is the first to adopt a virtual debit card issuance system. It is a digital bank card issued in accordance with virtual electronic card standards. It complies with the verification standards and management requirements specially formulated by regulatory authorities for virtual cards, and is different from the issuance standards and requirements of physical cards. If this system is promoted, there will be more digital bank card innovations in the future.

2. Leverage innovation of non-bank institutions

In addition to banks, non-bank institutions such as consumer finance, small loans and other financial companies also use Type II and Type III accounts to Continuously expand its own business.

(1) Consumer finance

In recent years, consumer finance companies have begun to develop in a race-and-land-enclosure style, and the consumer finance scene has become a battleground for military strategists. Online merchant giants rely on their rich customer and merchant resources and rich consumption scenarios to gradually establish competitive advantages in the industry. At the same time, consumer finance companies with relatively scarce scene resources focus on the underlying account payment needs of various consumers and seize the market with the help of type II and III households.

In September 2016, JD.com launched "Baidiao QuickPass", which can be bound to Apple Pay, Huawei Pay and other mobile wallets and WeChat payment. Using the user's Baitiao credit on JD.com, users can pay at UnionPay POS terminals through NFC or Scan the QR code to pay via WeChat. Baitiao QuickPass was launched by JD.com in cooperation with Bank of Shanghai and China Guangfa Bank. Users with Baitiao quota will create a Type II account at Bank of Shanghai or Guangfa Bank after applying for Baitiao Quick Pass. When users use Baitiao QuickPass, JD.com will transfer funds equivalent to the consumption amount to Type II accounts based on Baitiao's quota, and at the same time, Baitiao's quota will be reduced by the corresponding amount. At the same time, the user's Type II account funds are transferred to the merchant account.

In essence, Baitiao Quick Pass increases the speed of fund transfer and makes customers feel like they are using Baitiao credit for consumption. With the help of this model, Ctrip Finance has cooperated with Bank of Shanghai, China Merchants Union Consumer Finance has cooperated with China Merchants Bank and Bank of Shanghai, Masha Consumer Finance has cooperated with Bank of Shanghai, and BOC Consumer Finance has cooperated with WeBank to launch a series of products with the same model.

With the help of the innovation of Type II and Type III households, both parties have achieved a win-win effect.

In this model, cooperative banks gain a large number of customers through the promotion of consumer finance companies, and consumer finance companies expand consumption scenario resources.

(2) Mobile wallets

Mobile Pay applications have gradually developed from focusing on payment functions to payment, lending, financial management and financial ecosystem construction. Become an application that provides users with comprehensive financial services - mobile wallet. Since mobile wallet applications do not have regulatory approval for savings business, they often cooperate with commercial banks and rely on bank II and III account functions to allow users to open accounts online and provide real-time access, wealth management, consumer payment and other services. This achieves an in-depth integration of panoramic payment and financial management.

Huawei Wallet cooperates with China Merchants, Guangfa and ICBC, Xiaomi Finance cooperates with China Construction Bank and ICBC, and OPPO Wallet cooperates with Shanghai Pudong Development Bank to integrate coin wallet services. Before users activate the coin wallet function, they need to bind a Type I account for identity authentication. After activation, Huawei Change supports recharge, cash withdrawal, full-scenario payment, and purchase of bank agency funds, etc.

(3) Virtual credit card

Virtual credit card is essentially a credit card and does not have a card entity. The bank will establish a credit card account for the customer and manage the customer based on the account.

1. Virtual credit card process

On March 11, 2014, China CITIC Bank cooperated with Tencent, Alipay and Tianan Property to release WeChat Credit Card and Taobao Alien Card. However, two days later, the central bank issued the "Letter from the Payment and Settlement Department of the People's Bank of China on the Suspension of Alipay's Offline Barcode (QR Code) Payment and Other Business Businesses" on March 13, requiring it to immediately suspend offline barcode (QR code) payments. Payment and virtual credit card related businesses.

In October 2014, Pudong Development Bank launched E-GO credit card. This product is attached to a physical card. A virtual credit card set up under an existing credit card account, as an online independent account, will be completely distinguished from offline consumption, and is specifically suitable for online consumption.

In September 2015, Bank of China launched the "BOC Great Wall e-Quick Pass Card". This product is dependent on the physical card and does not set up a separate independent account. Before applying, users need to have a Bank of China credit card as their main account. Users need to repay the money to the main account card. Compared with Pudong Development Bank's E-GO card, which can only be used for online consumption, the Bank of China Great Wall e-Quick Pass card requires offline payment through the NFC function of the mobile phone.

In January 2016, CCB launched the “Dragon Card e-Payment Card”. After the user applies online, he or she obtains the card number, validity period, security code and other information through SMS verification, and then securely binds it in mobile banking or personal online banking. It is worth noting that this product is not attached to a physical card, and even users who do not have a CCB credit card can apply. However, after new users apply, they need to go to an offline outlet for an interview.

At the same time, GF launched the Geek Card. This product does not issue physical cards and is not attached to physical cards. It is activated through facial recognition + electronic signature, without the need for offline signatures. This product can be bound to Alipay, WeChat and other fast payments, and can also be used for offline payments through mobile Pay. However, this product does not accumulate points, has no installment business, and cannot withdraw cash.

In addition, Agricultural Bank of China has launched credit coins, CITIC has launched online payment cards, and Ping An and Bank of Communications have also launched their own virtual credit cards. For a time, all banks are continuing to exert their efforts, and the market competition is becoming increasingly fierce.

As major mobile phone manufacturers begin to get involved in the financial field, virtual credit cards based on mobile Pay have become a hot topic in the past two years. Apple released Apple Card on March 25, 2019. Although Apple Card has not entered the domestic market, it will undoubtedly bring a huge market demonstration effect to virtual credit cards.

On April 8, 2020, Huawei announced the launch of Huawei Card, and starting in September, it will gradually promote the service nationwide from pilot cities. Huawei Card is launched by Huawei in cooperation with China CITIC Bank and also has the benefit of cash rebates. Huawei Card can be bound to third-party app payments such as Alipay, WeChat, JD.com, and Meituan.

On August 31, China UnionPay collaborated with commercial banks, payment institutions, etc. to release the innovative digital bank card product "UnionPay Unbounded Card". The highlight is that it no longer relies on physical cards. Users can use "Cloud Flash Card" to "Payment App" enables online operations to implement card application, card use, and transaction management, and after the digital bank card is bound to the mobile phone, even if there is no network, the use of the card will not be affected.

2. It is difficult to break through remote face-to-face interviews

With the continuous enrichment of mobile payment scenarios, virtual credit cards have evolved from the initial online payment based on the Internet to relying on physical card accounts, and then to independent accounts Deeply integrated with payment channels, the digital nature of virtual credit cards may continue to deepen. However, remote face-to-face interviews are still a wall of sighs that virtual credit cards cannot break through.

Although GF Geek Card exempts new customers from face-to-face interviews, GF removed the product on August 6, 2019, and imposed transaction restrictions on existing customers. In addition, whether it is a Huawei Card or a UnionPay Unbounded Card, new customers of cooperative banks need to sign offline.

The regulations for offline signatures come from Article 38 of the "Measures for the Supervision and Administration of Credit Card Business of Commercial Banks" issued by the China Banking Regulatory Commission. "The card-issuing bank shall publicly and clearly inform the applicant of the application materials and basic information that need to be submitted." According to the requirements, the application materials must be personally signed by the applicant, and the card shall not be issued without the customer's knowledge or against the customer's wishes. "Three personal visits for credit cards means that the card issuer must implement the "three personal visits" principle for credit card applicants, that is, See the person in person, see the original application materials, and see the signature in person.

There has been much discussion about remote visa interviews. Although academic circles generally believe that current biometric and risk management and control technologies can meet regulatory needs, supervision still adheres to the rigid constraints of offline visa interviews.

In June 2020, the Minsheng Credit Card "National Life" App launched "National Easy Installment", and users can make installment purchases and credit card applications at designated offline merchants at the same time. Before users get a physical credit card and go to an outlet to activate it, they can obtain credit and complete credit purchases in advance at cooperative merchants designated by Minsheng Bank. However, Minsheng Bank’s attempt to break through offline visa applications was quickly halted by regulators.

On August 6, 2020, the Shenzhen Fintech Innovation Supervision Pilot Working Group announced the first four innovative applications in Shenzhen, China CITIC Bank Credit Card Center and Huawei’s “Intelligent Digitalization Based on TEE Solutions” The "Credit Card" project realizes the "three relatives" through technical means such as mobile TEE, secure network channels, liveness detection, manual question and answer, etc., and proposes to create an intelligent digital card issuance model of "artificial intelligence manual interview". But from the current point of view, Huawei Card has not adopted the remote interview mode on a large scale.

In the future, if the restrictions on remote interviews are relaxed, virtual credit cards can bring a better experience to users and provide a compliance basis for virtual credit card online businesses.

Innovation is still ongoing

Overall, the above innovations benefited from changes in regulatory attitudes. In the future, as policies further accept mobile payments and regulatory policy vacuums are filled, it is believed that the space for innovation will be further opened up in the future.