Alibaba Mobile Payments Dealt a Blow by Chinese Central Bank (NYSE: BABA)

By Kyle Anderson, Associate Editor, Money Morning • @KyleAndersonMM • August 5, 2015

The Alibaba mobile payments business was dealt a blow this week when China's central bank issued a draft that could limit online payments in China.

Chinese officials said the proposed new laws are part of a larger effort to curb online payment fraud and money laundering.

Alibaba Group Holding Ltd. (NYSE: BABA) operates the online payment site Alipay Wallet, which could be largely affected by the new laws.

Here's a look at the three main pieces of the new proposal that could hurt Alibaba online payments:

• Direct cash transfers between two individuals over third-party providers will now be prohibited. Cash must be moved through private bank accounts, which usually charge fees for transfers. Previously, money could be transferred with third-party sites without fees.
• Identity verification will be much stricter. Previously, you could set up a third-party payment account with just one form of ID, a mobile number, and bank account info. The new law would require three forms of ID.
• The central bank also wants to limit online payments through a payment provider to $800 per day. This is the most controversial piece in the proposal.

In 2014, China's mobile payments industry hit a gross merchandise volume of roughly 5.9 trillion yuan ($90 billion). It's expected to reach 9 trillion yuan this year. This all from an industry that didn't even register 1 trillion yuan in volume until 2013.

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Alibaba's Alipay Wallet is one of the nation's largest third-party online payment platforms along with Tencent Holding Ltd.'s WeChat.

It's an unsettling development for Alibaba and Alibaba mobile payments. The firm has already seen its stock dip more than 23% in 2015.

And while Alibaba stock is down from its IPO price, this is actually a great buying opportunity for long-term investors. BABA stock has been beaten down by unrealistic expectations and a stock market crash in China. But this remains one of the most innovative companies in the world.

Here's why Alibaba is the best e-commerce play on the market...

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