China to tighten supervision on nonbank payment providers

The central bank is consulting on rules for non-bank payment providers. The consultation will close on 19 February.

Under the proposed new rules non-bank payment providers can conduct payment business only according to their licence. Business activities outside the scope of the licence will not be allowed and they cannot grant credit in disguise.

The central bank will intervene with measures including regulatory interviews when a non-bank payment provider reaches a one-third share of the non-bank payment market share, or two providers gain half of the market share, or three providers gain a 60% market share.

Any non-bank service provider with a 50% market share in the national electronic payment market, or two providers with a combined 66% share, or three with 75% of the market, could be subject to antitrust investigations.

Nonbank payment providers may get their business partially suspended or their licenses revoked if their total losses exceed 50% of their registered capital, or they get the lowest grade in classification rating in two consecutive years.

Non-bank payment providers that stop doing business for more than two consecutive years from the date of licensing, or being under circumstances that have a significant negative impact to the steady running of the payment services market, will also have their business partially suspended until their license is revoked.

Leo Xin of Pinsent Masons, the firm behind Out-Law, said: “11 years have been passed since the promulgation of the Measures for the Administration of Payment Services of Non-Financial Institutions in 2010. Since then, the market and tech landscape of third party payment services have also changed dramatically. The regulation of the payment service industry has also become complex which cannot be simply dealt with by one piece of law."

"Under the new Regulations, we can see that there are interactions with other laws and regulations such as anti-monopoly law, cyber security law, and in future the PBOC will cooperate with other law enforcement bodies to jointly regulate the payment services of non-financial institutions," he said.