The reserve funds of China’s third party payments provider have seen a sharp decline after coming under centralised management by the People’s Bank of China (PBOC).
Since 14 January 2019 all of China’s third party payments providers have been required to deposit their reserve funds with PBOC, when previously they had been placed with commercial banks to earn billions of yuan in interest revenue.
A report from iResearch Consulting Group makes the conservative estimate that as of the end of January Chinese payments giants Alipay and Tenpay had delivered over 600 billion yuan in reserve funds to the Chinese central bank, where they will no longer generate interest earnings.
The latest data from the Chinese central bank indicate that as of the end of January customer reserves entrusted to it by third party payments providers stood at 1.398562 trillion yuan.
According to a report from 21st Century Business Herald the January reading marks the first time that the customer reserves of the Chinese payments sector have seen a decline, falling by 231.418 billion yuan, or 14.2% compared to the end of December 2018.
An executive from a payments provider in eastern China said that the drop in reserves was the direct result of PBOC severing of direct ties between third party payments platforms and commercial banks, with further reductions expected in February following a plateauing by the end of March.
“The reduction of 230 billion yuan is normal – after the serving of direct ties UnionPay and NetsUnion Clearing Corporation have made new requirements for proxy payments, such as agreement-based payments,” he said.
As a consequence third party payments platforms are no longer able to make payments on behalf of insurers, for example, given that UnionPay and NetsUnion require the payments providers to submit related agreements, yet insurers are not able to provide this insurance policy information to platforms.
Tighter compliance requirements following centralised management by PBOC also mean that third party payments platforms are no longer in a position to provide their services to certain “grey websites,” leading to further loss of business and associated reserves.