Nearly three years have passed since the public consultation, and the payment field has ushered in a major adjustment. On December 17, according to the official website of the People's Bank of China, Premier Li Qiang of the State Council signed Order No. 768 of the State Council on December 9, promulgating the Regulations on the Supervision and Administration of Non-bank Payment Institutions (hereinafter referred to as the "Regulations"), which will come into force on May 1, 2024. This is also the first administrative regulation in the financial sector after the Central Financial Work Conference was held.
The Regulations clarify the definition and business rules of non-bank payment institutions, reclassify the payment business, and strengthen the protection of consumer rights and interests. With the issuance of the "Regulations", the existing 185 payment institutions in the market have also ushered in a new test.
Failure to indicate "pay" will result in penalties
A reporter from Beijing Business Daily found that in response to the supervision of the non-bank payment field, the People's Bank of China has successively issued a number of regulations such as the Administrative Measures for Payment Services of Non-financial Institutions, the Administrative Measures for Bank Card Acquiring Business, and the Administrative Measures for Online Payment Business of Non-bank Payment Institutions since 2010. Compared with the earlier provisions on the establishment and registered capital of non-bank payment institutions, the Regulations put forward new requirements.
In terms of specific content, the Regulations have a total of 6 chapters and 60 articles, which make key provisions in four aspects: the definition and establishment of non-bank payment institutions, the improvement of payment business rules, the protection of the legitimate rights and interests of users, and the clarification of regulatory responsibilities and legal responsibilities.
The Regulations specify that a non-bank payment institution refers to a limited liability company or a joint stock limited company established in accordance with the law within the territory of the People's Republic of China, except for banking financial institutions, which has obtained a payment business license and engages in payment business such as transferring monetary funds according to the electronic payment instructions submitted by the payee or payer. Non-bank payment institutions shall aim to provide small-amount and convenient payment services, and shall not engage in other businesses that require approval in accordance with law without approval, and shall not engage in or covertly engage in liquidation business.
It should be noted that, in addition to the approval of the People's Bank of China and the approval of the payment business, the Regulations mention that the word "payment" should be marked in the name of a non-bank payment institution. If the word "payment" is not used in the name, the People's Bank of China will order it to make corrections within a time limit, give it a warning, circulate a notice of criticism, confiscate the illegal gains, and in serious cases, restrict part of the payment business or order it to suspend business for rectification.
In terms of registered capital, compared with the earlier provision that "the registered capital of a nationwide business shall be at least 100 million yuan, and the registered capital of a business in the same province or city shall be at least 30 million yuan", the Regulations require that the minimum registered capital for the establishment of a non-bank payment institution shall be RMB 100 million, and it shall be paid-in monetary capital. However, the People's Bank of China may, on the basis of factors such as the type of business, geographical scope of operation, and business scale of non-bank payment institutions, raise the minimum amount of registered capital provided for in the preceding paragraph.
The Regulations clarify the access conditions for payment institutions, such as registered capital, major shareholders, actual controllers, and senior executives, implement licensing management for changes in major matters, and establish and improve a normalized exit mechanism for institutions with serious violations of laws and regulations. For example, the same shareholder shall not directly or indirectly hold more than 10% of the equity or voting rights of two or more non-bank payment institutions of the same business type.
Su Xiaorui, an expert in consumer finance, said that with the prosperity of the digital economy and the deepening development of mobile payment, in recent years, the transaction scale and users of non-bank payment business have continued to grow, which has brought benefits to the real economy while gradually exposing some new problems. Therefore, it is necessary to keep pace with the times and update the regulations related to non-bank payments according to the latest situation.
"The Regulations require business institutions to indicate 'payment', which is conducive to clarifying the boundaries of payment business and maintaining the order of the payment market. The new content proposed in the "Regulations" in terms of registered capital is conducive to raising the operating threshold of payment institutions and enhancing their ability to resist risks. Su Xiaorui added.
The payment business is redivided
In terms of business types, the Measures for the Administration of Payment Services for Non-Financial Institutions, which came into effect in 2010, divide payment business into three categories: online payment, bank card acquiring and prepaid card business according to transaction channels and acceptance terminals.
The Regulations, on the other hand, divide the payment business into two types: stored value account operation and payment transaction processing according to whether the payer can receive advance funds. However, the single-purpose prepaid card business is not a payment business under the Regulations.
The reclassification of payment business is also one of the changes in the Regulations that have attracted much attention from the market. Wang Pengbo said that the previous model of dividing according to the three types of business, only through the medium to determine and standardize the boundaries of the relevant payment business, has not matched the status quo of multi-channel integration and development of the payment industry, and in practice it has shown a stretched side, and the payment market is in urgent need of regulatory regulations applicable to the current stage of development.
The relevant person in charge of the People's Bank of China also said in response to reporters' questions that the new classification method has good scalability on the one hand, which is conducive to preventing regulatory gaps. Under the new classification method, no matter what the external form of payment business is, it can be classified and managed according to the business substance, which can better adapt to the development and changes of the industry, and classify various new payment channels and payment methods into two basic business types. On the other hand, avoiding regulatory arbitrage is conducive to promoting fair competition. Based on the essence and risk characteristics of the business, the new classification method penetrates the superficial form of the payment business, which is conducive to unifying the access conditions and business rules requirements such as capital, eliminating regulatory depressions, and forming a fair institutional environment.
Previously, the People's Bank of China (PBoC) issued the Regulations on Non-bank Payment Institutions (Consultation Paper) (hereinafter referred to as the "Consultation Paper") in March 2021, and there are no significant changes in the wording of the Regulations and the Consultation Paper in terms of the use of the word "payment", registered capital and shareholder composition. After the issuance of the Consultation Paper, some non-bank payment institutions have made adjustments according to its contents, including license mergers, equity structure adjustment, etc., and some institutions in the market that do not have payment business licenses have changed their names.
According to the information combed by the Beijing Business Daily reporter, it was found that there are still non-bank payment institutions that do not clearly use the word "payment" in the company name, especially some prepaid card payment institutions, which are also significantly far from the requirement of "at least 100 million yuan" in terms of registered capital.
Wang Pengbo pointed out that the previously released Consultation Draft has had a huge impact on the industry, and some payment institutions have carried out reforms in accordance with the relevant provisions of the Consultation Paper. After the official release of the "Regulations", it will continue to lead the healthy development of industry norms, and practitioners will continue to move closer to the requirements of the "Regulations" in terms of company name and registered capital.
In addition, Wang Pengbo reminded that payment institutions are subject to the test of five-year license renewal, and whether the new classification method will affect the next round of renewal of payment institutions still needs to be further subdivided and clarified by the People's Bank of China. It is also worth looking forward to whether the prepaid card industry, which has been greatly affected by the development of mobile payment, can recover.
Strengthen the protection of consumer rights and interests
In addition to setting the "threshold" for the business development of the payment institutions themselves, the Regulations also put forward a number of requirements for the practitioners in terms of consumer protection, putting the prevention and resolution of risks and the protection of the legitimate rights and interests of users in a prominent position.
Compared with the Consultation Paper, the Regulations explicitly strengthen the protection of user information and add relevant requirements such as information processing, information confidentiality and information sharing, especially data export.
The "Regulations" emphasize that the protection of users' rights and interests should be strengthened. It stipulates that payment institutions shall draft the terms of the agreement in accordance with the principle of fairness, and protect users' right to know and the right to choose. Strengthen the protection of user information, and clarify relevant requirements for information processing, information confidentiality, and information sharing. Payment institutions are required to clearly mark the price of the services provided and charge reasonable fees. It is clarified that payment institutions shall perform the main responsibility for handling complaints.
In addition, the "Regulations" increase the punishment of serious violations of laws and regulations in accordance with the law. The People's Bank of China may, in accordance with the law, impose penalties on the relevant payment institutions such as fines, restrictions on part of their payment business, or order them to suspend business for rectification, up to the revocation of their payment business licenses. At the same time, it is clarified that directors, supervisors, senior executives and other personnel who are directly responsible may be punished according to specific circumstances, and market entry ban measures may also be adopted if the circumstances are serious.
Wang Pengbo pointed out that the protection of the legitimate rights and interests of consumers is in line with the development trend of financial supervision, which is also a part of the Central Financial Work Conference. It is also important in several previously issued regulations, indicating that payment institutions will have heavier responsibilities in consumer protection, especially the protection of consumer information, in the future. In 2023, the People's Bank of China (PBoC) has released a number of cases of penalties for failing to perform consumer protection duties, which may become another important direction for payment institutions to be fined in the future.
In response to the protection of consumer rights and interests mentioned in the "Regulations", the Payment and Clearing Association of China said that the "Regulations" will protect the rights and interests of users as the primary task of the development of the payment and clearing industry, and further clarify the responsibilities and obligations of payment institutions in the protection of user rights and interests, not only to respect the legitimate rights and interests of users such as the right to make their own choice and the right to know, but also to take measures to ensure the security of users' personal information and prevent user information from being leaked or abused. The promulgation of the "Regulations" will help to play a correct role in guiding and regulating all parties in the industry, and promote healthy competition and standardized healthy development of the industry.
Liu Xiaodong, general manager of Qian Daibao, believes that the current rapid development of the payment industry and the continuous innovation of financial technology, the "Regulations" further clarify the rules of payment business according to the existing business substance, determine the new classification method of payment business, improve the quality and efficiency of payment services, and better serve the needs of the real economy. The "Regulations" strengthen information security and data security, fully protect consumers' right to know and choose, and are conducive to improving consumers' sense of security in payment. It provides a legal guarantee and fundamental basis for the high-quality development of the payment industry in an all-round way.
Payment institutions responded positively
According to the data disclosed by the People's Bank of China, non-bank payment institutions will process more than 1 trillion payments in 2022, with an amount of nearly 400 trillion yuan, accounting for about 80% and 10% of the total electronic payment business in the country, respectively, with an average daily reserve balance of more than 2 trillion yuan, serving more than 1 billion individuals and tens of millions of merchants, and mobile payment is at the world's leading level, effectively contributing to the development of the real economy and improving people's livelihood.
In recent years, with the continuous strengthening of the supervision of the non-bank payment industry, fines have been issued one after another, and the industry as a whole is in a continuous reshuffle, and some institutions have withdrawn from the market. As of December 17, 2023, a total of 185 payment institutions across the country are still in business.
How do payment institutions view the promulgation of the "Regulations" and how will they adjust their business response to regulatory requirements? A reporter from Beijing Business Daily asked a number of payment institutions to understand. Among them, the relevant person in charge of Alipay said: "The implementation of the "Regulations" has laid the foundation for the future development of payment institutions for healthy competition and standardized and healthy development. Under the role of regulation, the payment industry will usher in further standardized and orderly development, which is also conducive to the long-term development of the real industry. ”
Tenpay mentioned that the promulgation of the "Regulations" on the one hand has improved the legal level of supervision of payment institutions, from the original departmental rules to administrative regulations, marking the fundamental regulations of the payment industry, which is conducive to strengthening industry supervision, improving regulatory efficiency and establishing regulatory authority, and on the other hand, conforming to the development trend of the payment service market, laying a solid foundation for standardizing the compliance operation of payment institutions and pointing out the way for the high-quality development of payment services.
Another senior executive of a payment institution told a reporter from Beijing Business Daily that the "Regulations" strengthen the supervision of the whole chain and the whole cycle of the non-bank payment industry, which is conducive to giving full play to the role of the law in guaranteeing the fundamentals, stabilizing expectations and long-term benefits of the industry, and empowering and escorting the high-quality development of the payment industry.
Liu Xiaodong pointed out that in the next step, Qian Daibao will conscientiously implement the "Regulations", take the "Regulations" as the fundamental guidance and basis for the company's business development, consistently adhere to the purpose of small amounts and convenience for the people, continue to improve the quality and efficiency of payment services, and continue to explore safer, faster, more stable and more inclusive payment services, so as to contribute to the development of the real economy and the people's livelihood.
The relevant person in charge of ePay also mentioned that ePay will carefully study Xi and resolutely implement the requirements of the "Regulations" to help merchants in their digital transformation and lead the healthy and sustainable development of the payment industry. The relevant person in charge of Hezhong Yibao, a subsidiary of Douyin Group, said that it will strengthen the awareness and ability of legal compliance and prudent operation, comply with regulatory requirements such as institutional management, reserve management, business management, risk monitoring and prevention, ensure the security of payment transaction data and funds, and effectively safeguard the legitimate rights and interests of financial consumers.
Su Xiaorui further analyzed that, on the whole, the "Regulations" issued this time focus on the improvement of business rules and the construction of a healthy competition order in the industry, and guide a clear direction for the business development of non-bank payment institutions. On the one hand, non-bank payment institutions need to focus on their main business, with the purpose of meeting the payment and settlement needs of users, and do a good job in protecting the rights and interests of financial consumers; on the other hand, non-bank payment institutions also need to establish a sense of healthy competition, do a good job in business segmentation management, and base themselves on the payment market with high-quality business quality and service levels, so as to lay a good foundation for continuing to serve the real economy.
Beijing Business Daily reporter Liao Meng