A new regulation for the e-payment industry in China
In a previous post, I was talking of the so-called decadence card, which is part of the problems in the e-payment industry in China. Companies that are providing e-payment services are not registered as financial institutions, therefore, they are not subject to the same People’s Bank of China (PBOC) regulations on financial institutions. However, their services involve financial transactions, and most companies even do money deposition which, from the regulation point of view, is illegal.
People were wondering, for a while now, when the government is going to interfere and install the rules. It was just a question of when, and not if.
Now, it’s official. On June 14th, the governor of PBOC has issued a new regulation on payment services by non-financial institutions. The following is a summary of the important points in the new regulation:
- All companies involved in the payment services must apply for a license, called the Payment Service License. That includes all companies involving in Internet payment, charge card and pre-charge card, POS transaction services, telephone POS transaction services, mobile phone payment, television payment, and any service deemed payment service by PBOC.
- Companies which plan to provide nationwide payment service must have a registered capital of at least 100 million RMB. Those providing regional payment service must have a registered capital of at least 30 million RMB.
- All companies must periodically provide financial and statistical reports to the PBOC.
- Money deposited by customers at the payment company can not be considered the asset of the company, and must be deposited in a specifically designated bank account of the company.
- The contributed monetary capital of the company must not be less than 10% of the daily balance of the deposited money. The daily balance is the average daily balance calculated from the daily balance of the most recent 90 days.
There are also other stipulations about risk management, system security, process and mechanism to prevent money laundering, fraud prevention and detection, etc.
Obviously, the new regulation is trying to weed out the smaller and riskier companies, and align the payment companies to the same regulations that governs financial institutions, such as banks.
How is this going to play out remains to be seen. However, the whole industry is entering a card shuffling phase, and the smaller ones are going to disappear. Now that there is a clear and definite regulation, larger players will jump in the ring very soon. Large communication service providers, such as China Mobile, China Unicom, China Telecom, etc, which have very deep pocket, have been taking a watch-and-wait stance on the side line for a while now, rubbing eagerly their hands. Most likely, we would probably see joint ventures from the communication service providers and one or more banks, or even China UnionPay. Alipay, QQ, All In Pay, etc, the current larger ones, would probably expand their model and extend their reach.
Who is going to be the winner? Let me find my crystal ball and dust it first.