The government is looking at ways to protect consumer rights and develop common standards in the burgeoning pre-paid card industry.
The popularity of the cards has flourished in recent years in major cities such as Shanghai and Beijing. In 2007, just four companies in Beijing issued them. Now more than 300 have been registered in the city with the People's Bank of China (PBOC).

Complaints have also risen. In Shanghai, where the cards are used most, 4,800 people complained between January and November last year compared with 4,049 during the whole of 2008.

Most complaints were about the cards' expiry, as money left on them is kept by some companies.

"I feel my money on the pre-paid card is very risky since I have to pay close attention to when it expires and try to spend all of it before that date or I will lose it. It's unfair to limit the time available to spend my own money," said Liu Xiaodan, a 26-year-old salesman.

It's estimated that the total volume of money left on pre-paid cards after they expire is more than 100 million yuan in Shanghai. The figure for Beijing is not available.

The PBOC will launch a series of supervisory regulations this year to oversee the operation of pre-paid card companies, said Zhang Wei, a financial industry analyst. "One of the most important aspects is the management of any money left on the card after it expires. Any investment of money on the cards either before or after they expire must be at zero risk."

Fang Xinghai, the head of Shanghai Finance Office, said his organization worked closely with the PBOC to keep an eye on pre-paid card companies.

"We suggest that special accounts should be opened with the bank where the money on the cards is held to ensure it is safe," he said.

"If that happens, even if the company goes bust, the money will still be fixed in the account and the cardholders' rights will be protected."

Warnings about the risks involved in using pre-paid cards are displayed on the Beijing Administration for Industry and Commerce's website. Complaints about the cards tend to reach their peak during the Spring Festival, when many people buy them as gifts for friends and relatives.

The first pre-paid card arrived in Beijing in 2002. Customers can deposit between 100 and 200,000 yuan on them for use at participating shops, restaurants and gyms.

Some companies issue them to their employees as an extra benefit.

Their popularity took off because they save the inconvenience of carrying money around and enable people to control spending, especially useful if they are given to children or housekeepers.

However, the companies behind them are currently regarded as unspecified financial institutions by the PBOC and, as such, are not strictly regulated. That means people have few rights if the company goes bankrupt. They will no longer be able to use the cards, no matter how much money is on them, and will have difficulty reclaiming their cash.

Cheng Xi, a 28-year-old engineer, said: "I received the pre-paid card as a gift but I would not buy one myself because I'm not familiar with the pre-paid card company and, if it goes bankrupt, my money would disappear."

No matter how distinguished and reputable the company behind a card is, its most important challenge is to win clients' trust.

"Having a standard trademark like China UnionPay, which has a good reputation for reliability, is necessary for a company to distinguish it from those with a bad reputation. The company that wins the trust of most clients will be the biggest winner," said Clark Lin, a financial analyst at Thomson Reuters.
Fu Dingsheng, a civil and business law expert at East China University of Political Science and Law, said: "Part of the pre-paid card company's capital should be classified as a guarantee deposit when the issuers register their companies. In that way consumers' rights can be met to some extent when a dispute occurs."

Even though the prepaid card sector is an emerging industry with little or no supervision, the government is speeding up its oversight of the sector.

"PBOC is playing a leading role in the supervision of the industry. We regard this as an important task to complete in order to protect consumers' rights to the greatest extent," said Fang from Shanghai Finance Office.