The People’s Bank of China has revoked the licenses of nine non-bank payment organisations for various abuses including misappropriation of funds and license abuses
On 26 June PBOC made public its decision on whether to extend the payment business permit of 93 non-bank payment entities, opting to revoke license of a total of nine, including the scandal-plagued Lefu8 company.
The companies saw their licenses revoked for infractions that include the unauthorised transfer of the licenses, failure to actually engage in payment operations and misappropriation of customer deposits.
PBOC has issued a total of 270 payment business licenses in eight batches since May 2011, but dialled back issuance numbers since the second half of 2015, as well as stead explicitly in August of last year that it would temporarily suspend license issuance for new companies.
The Payment and Clearing Association of China has pointed out that PBOC will primarily base its decisions concerning the issuance or maintenance of licenses on whether companies possess the ability to engage in the sustainable provision of payment operations.
The resulting scarcity in payment business licenses led to a surge in prices to as high as 100 million yuan, prompting some idle holders to engage in unauthorised “selling” or transfer of the regulatory documents.
Chinese regulators have focused in particular upon the independent “sale” of licenses or amendments to company information without the prior approval of authorities, with five of the nine revokees involved in this form of malfeasance.
Guangjiao Keji changed its directors, general managers, and senior financial executives without first applying for approval from regulators, while Lefu8 is reported to have amended key information on capital contributors in breach of regulation and then refused to cooperative with PBOC during subsequent investigations.
Several other companies saw their licenses saw their licenses revoked by the central bank for simply holding on to them without providing actual payment operations, while others were involved in the misappropriation of customer deposits.
PBOC says that Shanglian Dianzi misappropriated 2.15 million yuan and 640,000 yuan in 2015 and 2016, while in 2015 regulators discovered that Yinxin Shangtong had misappropriated a total of 33.94 in customer deposits.
Earlier this year at a symposium on policies for the prevention and disposal of illegal fund-raising, PBOC said that the majority of third party payment providers are running at a loss, with only a small number of reputable sector leaders in a position to turn profits.
PBOC also noted that such unprofitable third party payment providers were subject to risk of “absconding” given that they were entrusted with holding a large volume of deposits on behalf of customers.