(Corrects Peng's title in paragraphs 1-2)
BEIJING, Nov 29 (Reuters) - The head of Ant Financial Services Group, the payment affiliate of Alibaba Holdings Ltd , apologised on Tuesday following backlash from Chinese netizens over a social feature in the company's payment app that critics say enabled a sexually explicit dating service.
In an internal letter reviewed by Reuters, Chairwoman Lucy Peng said the company had removed a group within the Alipay app's new social feature "circles", including a group called "schoolyard diary" which drew intense fire from Chinese users after its launch on Nov. 24.
"These past two days have the most difficult since I had joined Alipay 7 years ago," said Peng, who apologised to users and promised to clamp down on illicit content on the platform.
The social group, which allowed only female users to post images publicly, blocked onlookers from commenting or contacting the women unless they had a high enough credit rating as determined by Ant Financial's data-backed rating system, Sesame Credit.
"It's like a brothel," protested one Alipay user on Chinese Twitter-like social media service Weibo. "It's enough to make me and my friends boycott the payments service."
Ant Financial has recently sought to increase its international footprint, planning to replicate the Alipay model in Thailand through a tie-up with Thai payment firm Ascend announced on Nov. 1st. Alipay is currently China's top online wallet service, with over 400 million local users.
The criticism comes as the Chinese government ramps up its censorship campaign against content deemed harmful to the national psyche, including pornography and violent videogames.
At a summit organised by China's top internet regulator earlier this month, officials called on tech firms and media outlets to clamp down on fake news and immoral content.
Earlier this month the same regulator formalised rules banning content deemed offensive on Chinese social video streaming sites.
Chinese state media broadcaster CCTV condemned the social media feature, which has attracted millions of views on the Alipay app and tens of thousands of comments on Chinese social media outlets.
Earlier on Tuesday an Ant Financial spokeswoman told Reuters the company would remove the controversial credit rating criteria but not group in question.
Peng said in the letter sent late in the afternoon that the company had decided to remove the group and permanently ban the users who posted suggestive photos.
She thanked the thousands of netizens who spoke out in her letter, saying "without going through the experience of seeing our brand at risk of being destroyed in a single day ... we could have presumed we were right and continued down the wrong path." (Reporting by Catherine Cadell, editing by David Evans)