China's credit card purchase volume surged by nearly 50% last year as more online merchants began accepting credit cards, but fraud is also on the rise.

The China Banking Association on May 8 said that total online credit card purchases reached 7.56 trillion yuan (US$1.2 billion) in 2011, up 47.95% from a year earlier.

The association said growth in new payment channels, particularly credit card payments initiated online, were a big factor in last year's surge. Some 167 million consumers used credit cards to make online payments last year, an association spokesperson tells PaymentsSource.

“About 33% of Chinese Internet customers used credit cards to make online payment lasts year, he says, up from 21.6% who did so the previous year. “The number of online payment users has been booming in line with increased card usage, the spokesperson says.

Another force driving credit card transactions was the addition of 101 nonfinancial institutions that gained permission in 2011 to conduct online transactions.

Among third-party providers of online payment platforms, Alipay accounted for 46% of the total market in 2011, followed by Tenpay with about a 21% share, the report said.

The report also warned of increased fraud with rising transaction volume and called for strengthening supervision in the sector, especially for nonfinancial organizations in the online payment arena.

“The sector has been booming fast ...exposing it to fraudulent transactions,” the spokesperson says. “We want the regulators to increase supervision on these payment providers and also regulate their pricing.”

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