Third-party Payment Regulation

Sep 13, 2017

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.

Tougher Regulations

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, 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.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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