The ins and outs of the deactivation of the personal collection code

At a time when mobile phone scan code payment has become one of the mainstream payment methods, the news that a "personal collection code" will be deactivated has aroused widespread concern from all walks of life, and with the approaching deadline of March 1, even some panic has spread among individual small merchants. What the facts are, let's sort out the real causes and consequences.

The source of the speculation on the suspension of the "personal collection code" comes from a notice issued by Chinese Min Bank on October 12, 2021, "Notice of Chinese Min Bank on Strengthening the Management of Payment Acceptance Terminals and Related Businesses (Yinfa [2021] No. 259)"[1][1](hereinafter referred to as Circular 259). In Circular No. 259, the central bank requires that the service institutions of the "personal collection code" should formulate a classification management system for the collection bar code, effectively distinguish the scenes and uses of the collection bar code used by individuals and special merchants, and for individuals with obvious business activity characteristics, they should provide the special merchant collection bar code, and refer to the relevant provisions of the special merchant. At the same time, the central bank also prohibits the use of "personal collection codes" for remote non-face-to-face collections.

3. Collection barcode management. For collection barcodes generated for individuals or special merchants and other beneficiaries, which are used by payers to read and initiate payment instructions, banks, payment institutions, clearing institutions and other institutions that provide payment services related to collection barcodes for payees (hereinafter collectively referred to as bar code payment and collection service institutions) shall formulate a collection bar code classification management system, effectively distinguish the scenes and uses of collection bar codes used by individuals and special merchants, and prevent collection barcodes from being leased, loaned, sold or used for illegal activities. For individuals with obvious characteristics of business activities, bar code payment and collection service institutions shall provide them with special merchant collection bar codes, and refer to the implementation of relevant management regulations of special merchants, and must not provide them with collection services related to business activities through personal collection bar codes.

Bar code payment collection service institutions shall take effective measures to prohibit personal static collection barcodes from being used for remote non-face-to-face collection. Where it is truly necessary to carry out remote non-face-to-face collection, the bar code payment collection service institution shall implement whitelist management for the corresponding payees, and carefully determine the conditions and scale of whitelist access, the validity period, the number of uses and transaction limits of the personal static collection barcode. For personal dynamic collection barcodes saved through screenshots, downloads, etc., the relevant provisions on the implementation of personal static collection barcodes shall be referred to.

The central bank's move is intended to further strengthen regulation of the third-party payments space.

According to the requirements of the Central Bank's Payment and Settlement Department in August 2017 "Notice of the Payment and Settlement Department of Chinese Min Bank on Migrating the Online Payment Business of Non-bank Payment Institutions from the Direct Connection Model to the Netlink Platform", all payment transactions involving bank cards have been cleared through the Central Bank's Netlink Clearing Platform (Netlink Clearing Co., Ltd.) in 2018, which means that all transactions between the third payment and bank accounts have been incorporated into the central bank's regulatory system.

However, if the user's account is only circulated within the third-party payment platform, that is, the payment between WeChat and WeChat or the payment between Alipay and Alipay, such payment transactions are not included in the supervision of the central bank. Therefore, it cannot be excluded that some criminals use personal collection codes as a money laundering tool to engage in related illegal crimes.

In addition, the taxable income of some enterprises or individual industrial and commercial households should be under supervision in the form of public accounts, and the irrational use of personal collection codes has created a convenience for them to evade taxes and evade taxes.

To this end, it is imperative for the central bank to supervise accounts such as WeChat and Alipay. According to the requirements of Circular 259, acquirers such as WeChat and Alipay should also establish and submit the correlation correspondence between the serial number of the bar code payment acceptance terminal and the corresponding 5 elements of information, and ensure the consistency and immutability of the correlation correspondence in the whole process of payment. These 5 elements of information include:

(1) Acquirer code;

(2) The code of special merchants (including small and micro merchants, that is, entity special merchants exempted from industrial and commercial registration in accordance with laws, regulations and relevant regulatory provisions, the same below);

(3) Unified social credit code of special merchants (small and micro merchants are the valid ID numbers of their main responsible persons, the same below);

(4) Special merchant acquiring and settlement account;

(5) The geographical location of the bank card acceptance terminal.

Based on the relevant expressions of the central bank's notice, the general speculation of the outside world is that all "personal collection codes" are upgraded to "special merchant collection codes" in a "one-size-fits-all" manner, and all are included in supervision.

Therefore, the ordinary people mentioned at the beginning of this article, especially individual industrial and commercial households such as vegetable vendors and traders, do not understand this policy. Such merchants generally believe that there will be additional charges in the process of upgrading the "special merchant" payment code, or worry that the change of payment method will have a negative impact on the operation.

However, on February 22 this year, the China Payment and Clearing Association issued the Announcement of the China Payment and Clearing Association on Optimizing The Bar Code Payment Service[2], which further explained the operation mode of the personal collection code part of Circular 259, and clarified that the current "personal collection code" will not be discontinued.

First, further optimize the business environment and provide more accurate and convenient payment services. A new "Personal Business Collection Code" has been set up, which users can freely choose to use. Users use the "personal operation collection code", the service is not reduced, the experience remains unchanged, the code assignment process is free, and can enjoy more efficient transaction reconciliation and other services.

Second, the current "personal collection code" is not closed, not stopped, and the function remains unchanged.

Third, respect the user's right to know and choose, member units should open channels, strengthen communication and interpretation of users, and avoid illegal elements taking advantage of opportunities to defraud.

Closely following the pace of the Payment and Clearing Association, WeChat and Alipay also issued separate announcements on the same day, both clarifying the following two points:

Personal collection codes can continue to be used

The personal collection code can be upgraded to the "personal operation collection code", and the user will also be invited to upgrade to the personal operation collection code in combination with the user's collection situation.

With the release of these announcements, the existing personal collection code method will be continued; and the upgrade of the "personal operation collection code" will also add some additional benefits while inheriting the existing rights, and it is voluntary and free. The concerns of the masses can be dispelled.

The non-suspension of personal collection codes has lifted the public's worries, will it delay the process of strengthening supervision by the central bank? We don't think so. As can be seen in the announcements of WeChat and Alipay, WeChat and Alipay will issue an upgrade invitation to users for "personal operation collection code" in combination with the user's collection situation. That is to say, WeChat and Alipay can rely on their respective powerful big data, artificial intelligence and other technology drivers to infer the nature of users, whether they belong to the special merchants of the business type. We estimate that regardless of whether the user chooses to upgrade or not, the payment transactions that occur will be submitted to the central bank for supervision. Therefore, the pace of central bank supervision has not stopped, but has been continued through more advanced technical means.

With the release of the announcement on February 22, the "one-size-fits-all" upgrade previously inferred by some institutions and media will bring benefits to offline aggregate acquirers, and the prediction of the return of bank card collection methods will no longer exist.

The first to be really favored is the two major payment platforms of WeChat and Alipay. First of all, because for the general public, whether it is small and micro enterprises using personal collection codes, individual industrial and commercial households, or consumers who make payments, the existing payment habits will not change, and WeChat and Alipay will also be able to consolidate their strong position in the existing payment field. Secondly, since the regulatory upgrade was achieved through a non-one-size-fits-all technical approach, WeChat and Alipay have been given the opportunity to cooperate with regulators to identify accounts, and can gain a lot of experience from regulators to further strengthen their ability to risk management through big data, artificial intelligence and other technical means.

In addition, regulators such as the central bank have also become the beneficiaries of this regulatory upgrade, which can extend the scope of supervision to the internal accounts of third-party payment platforms such as WeChat and Alipay, which can not only directly crack down on illegal elements who drill loopholes, but also summarize the clues of payment crimes in non-traditional fields, so as to further tighten the fence to prevent illegal crimes. In addition, the implementation of humanized policies has made the masses more at ease and more understanding of regulatory policies, and has also better echoed the important concept of "people-centered" put forward by the general secretary, so that the people have a greater sense of gain, happiness and security.

[1] http://www.pbc.gov.cn/tiaofasi/144941/3581332/4359567/index.html

[2] http://www.pcac.org.cn/eportal/ui?pageId=598261&articleKey=614362&columnId=595085

(The author is Rui Meng, Professor of Finance and Accounting, China Europe International Business School, and Gong Ming, Researcher of CHINA EUROPE Wealth Management Research Center)