The Regulations on the Supervision and Administration of Non-bank Payment Institutions are officially announced!
On November 24, the executive meeting of the State Council deliberated and passed the Regulations on the Supervision and Administration of Non-bank Payment Institutions, which lasted nearly three years from public consultation to complete release, and was also the first administrative regulation launched in the financial field after the Central Financial Work Conference was held.
So, why are the new regulations introduced, what are the changes, and how will they affect the non-bank payment market?
"Prescribing" for non-bank payments
As early as January 2021, the People's Bank of China (PBOC) issued the Regulations on Non-bank Payment Institutions (Draft for Comments), which intends to upgrade the legal level of the regulatory system for non-bank payments.
The executive meeting of the State Council held on November 24, 2023 deliberated and passed the Regulations on the Supervision and Administration of Non-bank Payment Institutions.
Today, the Regulations on the Supervision and Administration of Non-bank Payment Institutions were officially released.
It should be noted that the non-bank payment business has developed rapidly with the rise of China's digital economy, e-commerce and other new business formats, and has played an important role in the field of small-value and convenient payment.
According to relevant data released by the People's Bank of China, as of the end of September this year, there were 185 non-bank payment institutions (hereinafter referred to as "payment institutions") in China, which handled more than 1 trillion payments in 2022 with an amount of nearly 400 trillion yuan, accounting for about 80% and 10% of the country's total electronic payment business respectively, with an average daily reserve balance of 2.09 trillion yuan, serving more than 1 billion individuals and tens of millions of merchants.
However, with the rapid development of the non-bank payment industry, the phenomenon of illegal operation of some payment institutions also occurs from time to time.
For example, misappropriating user funds in violation of regulations, leaking or improperly collecting or using user information, and individual payment institutions taking risks to provide fund transfer channels for illegal and criminal activities such as telecommunications network fraud and cross-border gambling.
It's time to "check the pulse" of the non-bank payment industry. In this context, it is urgent to formulate special administrative regulations and establish a long-term mechanism to promote the healthy development of the non-bank payment industry. In fact, this work has been included in the first tranche of the State Council's 2023 legislative work plan.
The report of the 20th National Congress of the Communist Party of China proposed that all kinds of financial activities should be brought under supervision in accordance with the law. The Central Financial Work Conference proposed to strengthen the construction of financial rule of law and promote legislation in key financial areas and emerging fields in a timely manner. As a result, new regulations for the non-bank payment industry have emerged.
Improve rules, mitigate risks, and protect users
On the whole, the spirit of the Central Financial Work Conference has been consistent in the above-mentioned regulations, putting the prevention and resolution of risks and the protection of the legitimate rights and interests of users in a prominent position, so as to better coordinate development and security. Industry insiders believe that this new regulation also complements the legal system of non-bank payment institutions in China's legal system, solves the low level of supervision of non-bank payment institutions, and is conducive to improving the efficiency of supervision.
In terms of preventing and resolving risks and protecting the rights and interests of users, the regulations have been strengthened in four aspects. The first is to adhere to the licensed operation and strict entry threshold. Implement access management in accordance with the principle of "license before license", clarify the access conditions for payment institutions' registered capital, major shareholders, actual controllers, senior executives, etc., implement license management for changes in major matters, and establish and improve a normalized exit mechanism for institutions with serious violations of laws and regulations.
The second is to improve the rules of payment business and strengthen risk management. It is stipulated that payment institutions shall improve business management and other systems, and have business systems, facilities and technologies that meet the requirements. Strengthen the management system for payment accounts, reserves, and payment instructions, and make it clear that payment institutions must not misappropriate, occupy, or borrow customer reserves, and must not forge or alter payment instructions. Consolidate the responsibilities of payment institutions and users, such as due diligence and risk monitoring.
The third is to strengthen the protection of users' rights and interests. 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.
Fourth, increase the degree of punishment for serious violations of laws and regulations in accordance with the law. For violations of laws and regulations stipulated in the Regulations, the People's Bank of China may impose penalties such as fines on relevant payment institutions, restrictions on part of 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.
The Payment and Clearing Association said that the promulgation of the regulations has clarified the regulatory ideas and priorities, consolidated the basis for regulatory law enforcement, standardized the behavior of payment institutions, and comprehensively strengthened the supervision of the whole chain and the whole cycle for the People's Bank of China, strictly controlled the access of payment institutions, provided a guarantee for the prevention and resolution of risks in the payment field, and helped promote the standardized operation of payment institutions, prevent risks, and achieve steady development.
It is worth noting that, based on years of regulatory practice, the Regulations draw on the experience of other countries and regions in the classification of payment business, adhere to the concept of functional supervision, and start from the essence of the business, according to whether it can receive the payer's advance funds, and are divided into two categories: stored value account operation and payment transaction processing.
The relevant person in charge of the People's Bank of China said that the above-mentioned classification method has good scalability, which is conducive to preventing regulatory gaps, avoiding regulatory arbitrage, and promoting fair competition. At the same time, the supplementary provisions of the regulations make it clear that the transitional measures for non-bank payment institutions that have been established in accordance with the relevant provisions shall be stipulated by the People's Bank of China, and it will study and formulate implementation rules in the near future to do a good job in connecting the new business types with the original classification methods and promote a smooth transition.
Embrace compliance and help growth
As an active market player in the non-bank payment industry, how do institutions view the new regulations?
The relevant person in charge of Alipay said that the management regulations have further strengthened the supervision of the whole chain and the whole cycle of payment institutions, which is conducive to preventing risks in the payment industry. At the same time, 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. ”
The above-mentioned person in charge also specifically mentioned that the regulations will also greatly guide payment institutions to help the development of the real economy. Taking Alipay as an example, it further practices the original intention of "paying for the people and serving the entity". Reduce the cost of doing business and help small and micro enterprises recover after the epidemic. Through the launch of large-scale online and offline integrated activities such as the "Golden Autumn Consumption Festival", it helps merchants to transform their digital operations, so that merchants, consumers, and service providers can achieve a win-win situation in activities such as the consumption festival.
"Resolutely embrace compliance. The relevant person in charge of ePay said when talking about the regulations. In particular, he mentioned that the requirements of the regulations for the whole life cycle management and business rules of payment institutions are conducive to guiding payment institutions to focus on their main business, better serve the real economy, and truly achieve "payment for the people". At the same time, the regulations also implement the principle of "two unswerving", and treat all types of payment institutions, regardless of business scale, state-owned and private, domestic and foreign capital, equally, which is conducive to promoting fair competition in the payment industry.
Liu Xiaodong, general manager of Qian Daibao, believes that the formal promulgation and implementation of the regulations is conducive to improving market expectations, enhancing development momentum, and the payment industry will develop in a healthier, more compliant and more sustainable direction.
"At present, the payment industry is developing rapidly, financial technology is constantly innovating, and the regulations implement the "two unwavering" principles to stabilize market confidence. Liu Xiaodong said that according to the existing business substance, the regulations further clarify the rules of payment business, determine the new classification of payment business, improve the quality and efficiency of payment services, and better serve the needs of the real economy. From the aspects of access and exit, business rules, etc., a perfect market-oriented mechanism has been constructed, which has improved the fairness and transparency of the market, maintained the order of fair competition, and promoted the healthy development of healthy competition and standardization in the industry.
At the same time, it also puts forward higher requirements for the protection of consumer rights and interests. Strengthen information security and data security, fully protect consumers' right to know and choose, and improve 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. (Text/Xia Bin)