China's AliPay apologizes after soft porn floods its payment app

Alipay Circles Campus Diary

China's answer to PayPal has apologized after a new social media feature on its payments app was hijacked by promoters of soft pornography.

Alibaba (BABA) affiliate Ant Financial launched Circles on its Alipay app just a week ago. It allows users to chat, share photos, and create groups.

Photos of scantily clad women in suggestive poses immediately flooded groups called "Campus Diary" and "White Collar Diary." Some were accompanied by messages indicating the women were looking for wealthy men, others openly solicited rewards or gifts.

"We've been cherishing Alipay like our life. Now, it's reputation is tainted," said Alibaba co-founder and Ant Financial chairwoman Peng Lei in a statement titled "Wrong is Wrong."

Ant Financial completed a funding round earlier this year that valued the company at $60 billion, more than rival PayPal (PYPL).

Related: China cracks down on growing live streaming industry

Some Circles only allowed women to post, and restricted comments to users with credit scores of at least 750. Credit scores on the app range from 350 to 950, and are determined by factors such as job, salary, credit history and level of education.

One post in "White Collar Diary" showed a young woman posing on a bed with a strategically placed pillow. "I'll chat with someone who gives me a gift," she said in the accompanying message.

alipay social app new

"Campus Diary" blocked users with low credit scores from commenting, but did allow them to send gifts to the women.

Gifts are similar to a like button, but with cash attached. The transaction takes place on Alipay, sending money between users.

Wang Sicong, son of billionaire Wang Jianlin, criticized Circles on Weibo, posting a photo of a woman's backside with the word "Alipimp" splashed across the image, a twist on Alipay's Chinese name.

Circles was first rolled out in early November to a few select users in cities like Beijing and Shanghai. Users were invited to join groups like "Eligible Singles" and "Overseas Educated Chinese Returnee Elites," organized by Alipay.

The singles group required invitees to measure their attractiveness through Alipay's embedded facial recognition software, according to market research firm Marbridge Consulting in Beijing, citing reports from one user.

"Any kind of science experiment like this has a million and one ways to blow up in your face," said Mark Natkin, managing director at Marbridge.

"While I'm sure Alipay never intended for those it had invited to use Circles in this way, they inadvertently created an environment conducive to that," Natkin said.

Related: China holds "World Internet Conference" as censorship intensifies

China is deeply sensitive to the growing number of people trading the allure of sex for money online. The Cyberspace Administration of China issued regulations prohibiting people from live streaming any content that could "endanger national security and undermine social stability." The new edicts went into effect Thursday.

Ant Financial said it will shut down Circles with lewd material in the future. It already yanked "Campus Diary" and "White Collar Diary" earlier this week. Users that post malicious pictures will also be banned from Circles.

Peng defended the new social media features, saying "Campus Diary" was one bad group among others meant to foster "a beautiful sharing experience."

-- Serenitie Wang contributed to this report.

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