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Chinese Prepaid Card Company Network Glitch Causes Stir

A popular prepaid shopping card company in China is catching heat after a network glitch prevented the cards from working.

Shanghai-based company Chang-go Card faced backlash from dozens of cardholders after stores stopped accepting cards it issued because payments were unable to be processed, which caused customers to demand refunds. The company has since said a network glitch caused the problem, but assured the issue would be fixed by the end of December. This issue, however, may only be scratching the surface of deeper problems for the company.

“Amid the problem, some are questioning not only the management of the company, but also the health of the industry, which has been squeezed by competition and a government fight against corruption,” reported Caixin Online, a Chinese news site.

Among the list of problems include being forced to offer discounts in 2013 on its debit cards after there was a cash-flow constraint. An executive was also allegedly arrested on embezzlement charges, Caixin Online reported, as the company has been said to have a lack of oversight.

“When the problems at Chang-go came to light, a company executive tried to assure cardholders that the company was licensed and subject to the oversight of regulatory authorities,” the article said. “An official from China UnionPay said that the companies should have no problems if they strictly follow the POBC’s reserve deposit rules, but if there is embezzlement or a company uses its money to invest in the property market or engages in loan sharking, it could land it in trouble.”

In this case, Caixin Online said that banks “turned a blind eye” on the card-issuing companies because they were brining in large deposits. That has lead to even more difficulty with oversight of the accounts. But as prepaid gift cards become more popular in China, there may be a need to regulate the industry more. The future of the industry appears to be with the oversight that must be implemented, otherwise firms like Chang-go Card may fail, the article concluded.

 

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