Regulators are augmenting their regulations in the online third-party payment business by invalidating licenses, levying fines, and establishing a central clearing platform to ensure a safe network that would go beyond all the risks in the up-and-coming industry. According to experts, such a trend will trim down the number of reckless service providers and streamline operations the industry.
In China, weak third-party payment services are gradually pulling out while first-class mobile payment providers are gaining grounds. Beijing’s The Economic Information Daily (EID) reported that this may be as a result of the country’s tough regulations and vigorous effort to control risk.
Presently, there are over 200 service providers who offer third-party payment services in China holding licenses issued by the central bank—People’s Bank of China (PBC). Fan Shuangwen, head of Payment and Settlement Department at PBC recently stated that central bank has been going all-out to improve supervision on third-party payment since 2016.
Tight competition and the hot pursuit for large profits have led most payment businesses to neglect the most significant regulations, a factor that has led to unfair competition and market disorder. Conversely, the unremitting advances in tech have enhanced innovation in the payment industry, but this has also complicated the risks even more.
PBC has been working to tighten regulations, as a risk prevention measure for the third party industry. In May, the central bank imposed a fine worth 30,000 yuan ($4,450) on Alipay and Tenpay, the country’s two top third-party payment providers owned by Alibaba and Tencent respectively. The fine was a penalty for failing to act in accordance with the stipulated regulations.
According to EID, by the first quarter of this 2017, Alipay and Tenpay were holding 53.7% percent and 39.5% shares respectively of the nation’s 18.8 trillion yuan on mobile payments, making them the two leading players market.
From early 2016 up till now, PBC has levied notable fines including a whopping 52.95 million yuan imposed on Beijing-based payment company YeePay.com, and went further to confiscate all its illegal profits.
Risk prevention efforts
On Jan 13, PBC officially set up a system to help store customer’s reserve deposits in a central custody. All service providers are now expected to allocate approximately 20 percent of customer’s reserve deposits to a designated bank account to prevent the platforms from using the clients’ money.
What’s more, since March 31, the PBC has been conducting an operation that involves a clearinghouse to watch online transactions. This move is geared towards reducing financial risks for by cutting off the direct merchant-client link in the clearing business from third-party payment firms.