THE WALL STREET JOURNAL. Wednesday, January 11, 2017 |B
BEIJING—China’s financial
giants are lumbering into the
country’s increasingly impor-
tant mobile-payments market,
hoping to shake the domina-
tion of nimble tech firms such
as Alibaba Group Holding Ltd.
affiliate Ant Financial and
Tencent Holdings Ltd.
At stake is the world’s larg-
est mobile-payments market,
valued at $4.1 trillion by trans-
actions in the year to Sept. 30
and growing fast: With Chi-
nese shoppers using their
phones to pay for everything
from cinema tickets to grocer-
ies, such payments surged by
106% year on year in the third
quarter, according to research
firm Analysys.
To date, the rapid growth
has been driven by private
companies. Alipay, owned by
Ant Financial Services Group ,
and Tencent’s Tenpay plat-
form, which includes the popu-
lar WeChat Pay, together con-
trol 89% of the market. Each
has developed swipe-and-go
payments systems based on
bar or quick-response codes,
often known as QR codes, that
are fast and convenient to use
and that have revolutionized a
payments system previously
dominated by cash and bank
cards.
By contrast, state-backed
China UnionPay Co., which
holds a monopoly on credit-
card payments in China, has
1% of the mobile market, while
China’s large state-owned
banks have been slow to intro-
duce their own rival mobile-
payments systems.
Now, through a combina-
tion of new regulation and in-
creased efforts to launch mo-
bile-payments platforms, the
state sector is fighting back.
Last month UnionPay said
it was seeking standardization
of QR codes, a move analysts
say could bring all mobile
payments in China into a net-
work dominated by the com-
pany. Any such standardiza-
tion could encourage other
smaller mobile-payments
players to join forces with
UnionPay to challenge the
For six years as the U.S.’s
top accounting watchdog,
James Doty has pushed for au-
ditors to disclose more about
what they do. Now he may be
running out of time.
Mr. Doty, chairman of the
Public Company Accounting
Oversight Board, may have
only months left to pursue his
wish list, including a change
that would require auditors to
tell companies’ investors more
of what they discovered dur-
ing their audits. He has al-
ready served more than a year
beyond the official end of his
term and the coming Trump
administration, which will de-
cide whether to reappoint him,
is interested in rolling back
regulation, not creating more.
That puts Mr. Doty’s ap-
proach at risk at the PCAOB,
which is responsible for ensur-
ing the Big Four accounting
firms and other auditors con-
duct rigorous, impartial re-
views of public companies.
The 76-year-old Mr. Doty,
who declined to be inter-
viewed for this article, has
been the PCAOB’s chairman
since 2011. Among other dis-
closure initiatives under his
leadership, the board enacted
a rule requiring an audit firm
to identify which partner
would be heading each audit,
starting next month.
One important project Mr.
Doty wants to finish is theoverhaul of the audit opinion
in companies’ annual reports.
This is the report in which an
audit firm attests that a com-
pany’s financial statements are
accurate.
The PCAOB’s proposal
would require an auditor to go
beyond the current boilerplate
and tell investors about the
toughest decisions it faced
during its review.
Auditors initially had reser-
vations about the idea, but in-
dustry representatives said
they have been able to work
with Mr. Doty on that and
other issues.
But the overhaul, which the
PCAOB had expected to com-
plete by the end of 2016, has
been delayed. Mr. Doty said in
a statement he hopes to move
it forward early this year, but
even if the PCAOB approves
it, the move is subject to ap-
proval by the Securities and
Exchange Commission.
An SEC led by a Trump ap-
pointee will have the final say.
Jay Clayton, a veteran Wall
Street lawyer, is President-
elect Donald Trump’s nominee
to head the SEC.
A commission led by Mr.
Clayton, if he is confirmed by
the Senate, will also decide
whether Mr. Doty stays at the
PCAOB.
Mr. Doty said last month
that he intends to stay until
“someone tells me ‘thank you
for your service’ and tells me
to pack my boxes.”BYMICHAELRAPOPORTClock Is Ticking for
Accounting Watchdog
FINANCE & MARKETS
The approach of James Doty, chairman of the Public Company
Accounting Oversight Board, shown in 2014, is at risk.ALEX BRANDON/ASSOCIATED PRESSmarket leaders.
“If UnionPay works at this
angle, it would definitely im-
pact the current market situa-
tion of having two dominant”
players, said Dong Ximiao, a
financial-studies scholar at
Renmin University of China.
“Cooperation with UnionPay
carries a sense of security for
its partners.”
UnionPay hasn’t detailed
what it means by code stan-
dardization and declined to
say whether it is targeting Ali-
pay and Tenpay. It has sug-
gested that uniform codes
could help improve the safety
of mobile payments.
“Standardizing the technol-
ogy can reduce the basic secu-
rity risk of transaction fraud,”
said Song Hanshi, UnionPay’s
general manager of technol-ogy, last month.
There are signs that Union-
Pay stands to benefit from the
sort of official backing that
helped it gain a monopoly over
credit-card payments in the
early part of this century. In
July, an association backed by
the central bank circulated a
draft mobile-payments policy
that contained similar lan-
guage on standardization and
consumer safety to that in
UnionPay’s December an-
nouncement. The People’s
Bank of China hasn’t issued an
official policy.
Any moves to tighten the
rules would represent a shift
for the market leaders. The
Chinese regulator issued a sus-
pension on the use of bar and
QR codes in March 2014 but
left the edict unenforced, en-abling Alipay and Tenpay to
develop their mobile-payments
infrastructure.
In announcing its push for
code standardization, Union-
Pay suggested that mobile
platforms may be less reliable
than Chinese banks.
“We want to avoid situa-
tions where funds sunk into
‘virtual accounts’ bring finan-
cial risks,” UnionPay said, re-
ferring to a feature of Alipay
and WeChat Pay that enables
users to keep a cash balance in
online “wallets.” UnionPay said
banks need to have the same
level of access to payment in-
formation that they had with
traditional bank cards. Ant and
Tencent declined to comment.
The “standardization” push
comes as China’s largest lend-
ers are pitching new mobile-
payments systems.
The biggest commercial
lenders, including I ndustrial &
Commercial Bank of China
Ltd. and Agricultural Bank of
China Ltd., have developed
mobile-payments applications
with features almost identical
to Alipay and Tenpay, offering
users the ability to direct and
accept money transfers.
In November, China Con-
struction Bank Corp., China’s
second-largest lender by as-
sets, introduced a system
called Longzhifu, or Dragon-
Pay. Its application includes
facial-recognition technology
and “near-field communica-
tion,” a type of payment tech-
nology used by UnionPay col-
laborators Apple Pay and
Samsung Pay.
Among DragonPay’s more
unusual features is one that
hints at its state backing: a
payment function for “Com-
munist Party membership
fees.” In China, only the six
biggest state banks can collect
such payments.
About a year ago, UnionPay
launched QuickPass, a contact-
less-payment system similar to
Visa Inc.’s payWave. The sys-
temhasyettocatchon,in
part because systems offered
by Alipay and Tenpay are so
popular.
—Yang Jie
contributed to this article.BYCHUIN-WEIYAP
China’s Banks Chase Mobile Cash
Mobile-payments transaction
volumeTop 10 mobile-payments
platforms by market share*Massive Mobile
UnionPay is vying with tech titans in a surging mobile-payments
market in China.Source: Analysys THE WALL STREET JOURNAL.10 trillion yuan024682013 ’14 ’15 ’
Note: 10 trillion yuan = $1.44 trillion *As of the end of the third quarter 2016.Alipay
Tenpay
Lakala
Lianlian Pay
Union Mobile
1qianbao
UnionPay
Yeepay
99Bill
Baidu Wallet50.4%
38.
3.
1.
1.
1.
1.
0.
0.
0.Lenders such as Agricultural Bank of Cbina are playing catch-up.THOMAS PETER/REUTERSREDEEM NOW AT WSJPLUS.COM/CORECOLLECTIVE
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