Third-party payment regulation

Updated 2017-08-02 11:03:01 Global Times

Regulator beefs up supervision of the mobile payment business to diminish financial risks

Regulators are enhancing their supervision in the third-party online payment business by imposing fines, revoking operation licenses and setting up a centralized clearing platform to build a safety net that would stem out risks in the industry. Experts say such a trend will trim the number of irresponsible service providers and further consolidate the industry.

Weaker third-party payment service providers in China are being phased out while the dominant positions of top-caliber mobile payment providers further strengthen. This comes as the country has resorted to tougher regulation and taken more active measures to control risk, Beijing-based The Economic Information Daily (EID) reported Thursday.

Currently, there are about 200 third-party payment service providers in the country with licenses issued by the People's Bank of China (PBC), the central bank.

Fan Shuangwen, deputy head of the Department of Payment and Settlement at the PBC, recently said the central bank has been striving to tighten supervision on third-party payment to prevent risks since early 2016, according to media reports.

Fiercer competition and pursuit of hefty profits have led to some payment businesses to neglect relevant regulations, causing market disorders and unfair competition, Fan was quoted as saying.

On the other hand, incessant technological advances have bettered the innovation circles of the payment business, but this has caused risks to become more complex, noted Fan.

Tightened regulation

The EID report said tougher regulation and risk prevention measures have been the main themes for the PBC's supervision of the sector over the past two years.

In May, the PBC imposed a fine of 30,000 yuan (,450) on both Alibaba's Alipay and Tencent's Tenpay, the nation's two leading third-party payment providers, for failing to comply strictly with relevant regulations.

Analysts perceived the fines as the central bank's rising vigilance against thrid-party payment tools.

As of the first quarter of this year, Alipay held a 53.7 percent share of China's 18.8 trillion yuan mobile payment market, while Tenpay held 39.5 percent, making them the top two players in the sector, data from Beijing-based market consultancy Analysys showed.

From 2016 to date, notable PBC fines have included a whopping fine of 52.95 million yuan which was imposed on Beijing-based payment firm in addition to confiscation of its illegal gains.

Another fine of 5.33 million yuan was given to Guangzhou-based for violating the "Regulations for Non-bank Payment Agencies' Mobile Payments," a rule enacted by the PBC at the end of 2015.

The regulation stresses the registration of clients' real names, which aims to control payment risks on mobile platforms.

The EID report said that many of the malpractices are related to negligence of the regulation in using deposits and the use of provisions of money held by a third-party organization that is not their property. Some firms even illegally embezzled large amounts of money.

Fan said, as of July this year, the PBC decided not to extend licenses for 10 problematic third-party payment service providers. Another 10 will have to be merged before granted license extensions. The total number of the license holders was reduced to 247 from the previous total of 271.

Amid this, the PBC has also temporarily stopped issuing new licenses altogether since March 2015.

Qi Xingang, chief operating officer at industry news site, said that the central bank's hardening of regulation has caused many big firms such as Xiaomi Inc and Dalian Wanda Group to acquire business operational licenses for third-party payment business via mergers.

More than 62 acquisitions have taken place in the segment since the PBC halted issuing licenses, said Qi.

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