Alipay to discontinue offline-payment service

Zhu Zhu, a Hangzhou-based company spokeswoman, said that over 10,000 such devices, which cost less than its competitors, were installed nationwide to cover e-commerce logistics, airlines operators, hotels, and similar businesses.

According to a news release by Alibaba's public relations team in Hong Kong in March, each Alipay device cost 3,000 yuan. To encourage use of the device, Alipay allowed package delivery services and e-commerce sites to use them for an unlimited period of time by paying a 500-yuan-per-device deposit.

Alipay said at the time that it was "essentially giving away these devices ... and is showing it's willing to lose money on hardware in exchange for a piece of the potentially vast revenue stream from COD processing fees," it said.

Alipay Vice-President Fan Zhiming had said that his company was not competing with China's banks by entering the COD market, and would stay focused on offline payment for online purchases only.

A small processing fee paid by consumers upon delivery was split with UnionPay, a banking consortium that runs the country's interbank network, as well as the bank providing the card.

But it still failed to dismiss concerns from UnionPay, which has tightened third-party payment policies since July, experts said.

In a recent board meeting, UnionPay has urged banks to complete all online transactions and clearing through its own channels, indicating that third-party payment enterprises cannot skirt UnionPay to complete bank transactions, Xinhua News Agency reported on Tuesday.

UnionPay aims to have all nonfinancial institutions settle through its channels by July 2014, Xinhua said.

"Alipay had obtained from the central bank the license to carry out offline payment services. There should be no policy restrictions on that front," said Zhang Meng, an analyst on Internet finance at consultancy Analysys International.

Xu Hongcai, a senior researcher with the China Center for International Economic Exchange, agreed. "The unification under the UnionPay framework may facilitate supervision. But UnionPay's monopoly is not conducive to the market at large," he said.

Xu believed that it is now critical to see how the central bank, which releases licenses to third-party payment platforms, views and handles the issue.