Market Context Shanghai has launched in-depth investigation this year against beauty salons and gyms who issue prepaid cards. Shanghai Consumer Rights Protection Commission had registered over 7,000 complaints regarding prepaid cards in 2015 in comparison to 5,800 in 2012. Majority of complaints were related to money loss due to sudden closure of prepaid cards. Initial investigation has revealed that most complaints have been registered against beauty salons and gyms. Shanghai Commission of Commerce has stated that it will increase supervision and regulations on prepaid card issuers. Market Innovation - Key Insights Issues related to prepaid cards are not new in the Chinese market. Earlier this year, China banned Shanghai Chang Gou Enterprise Services from issuing prepaid cards and warned non-banking financial institutions due to breach in legal framework, impacting customer interests and disrupting the market. In Shanghai there are around 24,000 beauty salons out of which nearly 38% issue prepaid cards. Previously attempts were made to register prepaid card issuers back in 2014. However, only negligible issuers registered with the system. Existing legislation mandates a deposit of around USD 60,000 in banks as reserves by the issuers but it can be withdrawn any time. As a result, this rule is not very effective. PayNXT360 View Under current scenario it can be expected that the commission will come up with strict regulations in order to minimize fraudulent cases in this segment. This is likely to impact new players entering into the market.

1. Prepaid card regulations in China expected to tighten
over the next two years; likely to boost consumer
confidence
Analyst View Point Series

2. Table of Contents
Market Context
Market Innovation - Key Insights
PayNXT360 View

3. Market Context
Shanghai has launched in-depth investigation this year against beauty salons and
gyms who issue prepaid cards. Shanghai Consumer Rights Protection Commission
had registered over 7,000 complaints regarding prepaid cards in 2015 in comparison
to 5,800 in 2012. Majority of complaints were related to money loss due to sudden
closure of prepaid cards. Initial investigation has revealed that most complaints have
been registered against beauty salons and gyms. Shanghai Commission of
Commerce has stated that it will increase supervision and regulations on prepaid card
issuers.

4. Market Innovation - Key Insights
Issues related to prepaid cards are not new in the Chinese market. Earlier this year,
China banned Shanghai Chang Gou Enterprise Services from issuing prepaid cards
and warned non-banking financial institutions due to breach in legal framework,
impacting customer interests and disrupting the market. In Shanghai there are around
24,000 beauty salons out of which nearly 38% issue prepaid cards. Previously
attempts were made to register prepaid card issuers back in 2014. However, only
negligible issuers registered with the system. Existing legislation mandates a deposit
of around USD 60,000 in banks as reserves by the issuers but it can be withdrawn
any time. As a result, this rule is not very effective.

5. PayNXT360 View
Under current scenario it can be expected that the commission will come up with
strict regulations in order to minimize fraudulent cases in this segment. This is likely
to impact new players entering into the market.

6. To Know More
To know more and gain deeper understanding of
prepaid gift card industry in China, click here.