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An Alipay logo is seen at a cashier in Shanghai on Jan. 12, 2017.

Aly Song/Reuters

China’s top antitrust agency is looking at whether to launch a probe into Alipay and WeChat Pay, prompted by the central bank which argues the digital payment giants have used their dominant positions to quash competition, sources with knowledge of the matter said.

The State Council’s antitrust committee has been gathering information on Alipay, owned by Ant Group which in turn is an affiliate of Alibaba Group Holding Ltd, as well as on Tencent Holdings Ltd’s WeChat Pay for more than a month, they said.

Any investigation would likely dampen enthusiasm for Ant Group’s planned dual listing in Hong Kong and Shanghai that is seeking a valuation of more than $200 billion.

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The antitrust committee has not made a decision about whether to proceed with an investigation, the sources said, and it was not clear when a decision might be made. One source said the committee is taking the People’s Bank of China’s recommendation “very seriously.”

The sources, who declined to be identified as the policy deliberations were confidential, also said that Ant and Tencent are lobbying government officials in an effort to prevent a probe.

The State Council Information Office and the central bank did not respond to requests for comment. Ant and Tencent did not respond to requests for comment on the potential probe.

The People’s Bank of China formally recommended sometime in the second quarter that the State Council committee should look into antitrust issues posed by the country’s non-bank payment companies, one of the sources said.

GIANTS IN THEIR FIELD

If the State Council antitrust committee decides to go ahead with a probe it would mark a change of tack for regulators.

“I do find it surprising as the Chinese regulators have pretty much taken a wait and see approach and only lightly regulated China’s digital payments space since they started in 2004,” said Zennon Kapron, director of Shanghai-based financial industry research firm Kapronasia.

“This is also the first time that they are looking at Alipay and WeChat Pay from an anti-trust perspective,” he added.

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Alipay and WeChat Pay services, which enable payments at the convenience of a code scan, have become ubiquitous in daily life in China, with many people now rarely using cash.

The country’s mobile banking market logged some 56.2 trillion yuan ($8 trillion) worth of transactions in the last three months of 2019, according to domestic consultancy Analysys. It estimates Alipay commands 55% of the market and that Tencent’s fintech business, most of which is WeChat Pay, has 39%.

But authorities have been keen to whittle back their dominance. In an effort to encourage smaller players to enter the market, the central bank said last year it planned to standardize the interoperability of QR code payments.

China’s legislative body is also debating major revisions to its antitrust laws for the first time in more than 11 years, which are set to include expanded criteria for judging a company’s control of a market.

One of the world’s most valuable unlisted companies, Ant generated about $2.2 billion in profit in the fourth quarter, according to Reuters calculations based on figures from Alibaba regulatory filings. Its main service Alipay has more than 900 million users in China.

WeChat Pay had over 800 million monthly active users in the fourth quarter, according to Tencent’s 2019 annual report.

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