Throughout the past few weeks the Chinese banking regulators have intervened on several occasions to put a halt on some innovative products, including virtual credit cards provided by third-party providers and e-commerce companies. At the end of March, People’s Bank of China also announced that it would cap amounts the Chinese can spend using smartphone payment services.
While financial innovation from bank and non-bank actors can create new kinds of risks for consumers, it can also create huge opportunities for the financial sector to expand scale and reduce transaction costs. A recent CGAP report China: A New Paradigm in Branchless Banking? explores how China’s innovative payment ecosystem could significantly deepen financial access in the country, where more than one hundred million people live in poverty and over sixty percent of the poorest population segment has no access to formal banking services.