China’s third party payments sector is expected to undergo a major reshuffle as new restrictions come into play and financial regulators step up their scrutiny.
On 5 July the Chinese central bank released the “July 2018 Public Information on Decisions Concerning the Development of Non-bank Payment Entities” (2018年7月非银行支付机构续展决定公示信息), revealing that 21 payment organisations had obtained the approval of regulators, while another 4 had been barred.
Three payment organisations failed to satisfy the provisions of the “Non-banking institution Payment Service Administrative Measures” (非金融机构支付服务管理办法), while one provider, Anhui Changrun (安徽长润), did not submit an application.
As of 5 July the Chinese central bank had expanded the number of payment license cancellations to 33 in total, reducing the number of active payment license to 239.
The cut back in payments license arrives just as China bring an end to direct ties between third party payment providers and the country’s banks, forcing them to instead process transactions via a centralised platform run by China Nets Union Clearing Corporation as of 30 June.
The Chinese central bank also issued an emergence directive on 9 July 2018, announcing a gradual increase in the centralised delivery ratio for the customer deposits of payment organisations to 100% by 14 January 2019.
In addition to shrinking the number of participants in the payments sector, China’s financial regulators are also applying heavier pressure to those still active with an increase in the number of fine issued.
In the first half of 2018 at least 33 payments companies in China received 38 fines worth over 45 million yuan, with Dinpay alone incurring a fine of 42 million yuan.
“Against a background of increasingly strict inspection and regulation, third party payments entities are likely to gradually reduce in number,” said one member of industry to Yanzhao Metropolis Daily.
“This is the main trend for the development of the third party payments sector.”
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