Promote the standardized and orderly development of the payment industry

The payment sector has ushered in a blockbuster new regulation. Recently, the Regulations on the Supervision and Administration of Non-bank Payment Institutions (hereinafter referred to as the "Regulations") were officially promulgated and will come into force on May 1, 2024. This is the first administrative regulation in the financial field after the Central Financial Work Conference was held, and it is also the first administrative regulation for the supervision of non-bank payment institutions in mainland China.

The new rules come at an opportune time

With the rise of new business formats such as digital economy and e-commerce in mainland China, non-bank payment business has developed rapidly, and has played an important role in the field of small-value and convenient payment. The reporter learned from the People's Bank of China that as of the end of September 2023, there are 185 non-bank payment institutions in the country, processing 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 helping the development of the real economy and improving people's livelihood.

"In recent years, the People's Bank of China has adhered to the equal emphasis on development and standardization, promoted the centralized depository of payment institutions' reserves, disconnected them from commercial banks, urged large payment platform enterprises to rectify their payment business, prevented risks and hidden dangers, and achieved positive results." The relevant person in charge of the People's Bank of China said that at the same time, the phenomenon of illegal operation of some payment institutions also occurs from time to time, such as: misappropriation of user funds in violation of regulations, leakage or improper collection and use of user information; individual payment institutions take risks to provide fund transfer channels for illegal and criminal activities such as telecommunications network fraud and cross-border gambling.

The promulgation of the "Regulations" is timely to promote healthy competition and healthy and sustainable development of the industry, and build new support for the high-quality development of the payment industry. Zheng Haojian, general manager of Tenpay, told reporters that on the one hand, the "Regulations" have upgraded the legal level of supervision of payment institutions, from the original departmental rules to administrative regulations, marking the payment industry has fundamental regulations, which is conducive to strengthening industry supervision, and on the other hand, it conforms to the development trend of the payment service market and lays a solid foundation for standardizing the compliance operation of payment institutions.

According to the existing business substance, the "Regulations" further clarify the rules of payment business, 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. Liu Xiaodong, general manager of Qian Daibao, said.

The relevant person in charge of the Payment and Clearing Association said that the "Regulations" have built the basic framework and main content of the supervision of non-bank payment business, and will further promote the comprehensive and scientific supervision of non-bank payment services, and provide an important legal guarantee for the industry to effectively prevent and resolve risks, effectively serve the real economy, and form a high-quality development pattern.

Reclassify business types

The "Regulations" make it clear 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. It is worth noting that the "Regulations" have reclassified the types of payment business, and the non-bank payment business is divided into two types: stored value account operation and payment transaction processing according to whether it can receive the payer's advance funds, but the single-purpose prepaid card business does not belong to the payment business stipulated in the Regulations.

Since 2010, the Measures for the Administration of Payment Services of Non-Financial Institutions have divided payment business into three categories: online payment, bank card acquiring and prepaid card business, according to transaction channels and acceptance terminals. With technological innovation and business development, emerging methods such as barcode payment and face payment have emerged, and the existing classification methods cannot well meet the needs of market development and supervision. "The previous model of dividing according to three types of businesses, only using the medium to determine and standardize the boundaries of relevant payment businesses, has not matched the current situation of multi-channel integration and development in the payment industry. Wang Pengbo, a senior researcher in the financial industry at Broadcom Consulting, said.

The relevant person in charge of the People's Bank of China said that the new classification method has the following characteristics: First, it has good scalability, which is conducive to preventing regulatory gaps. Under the new classification method, regardless of the external manifestation of the payment business, it can be classified and managed according to the business substance. The second is to avoid regulatory arbitrage, which 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.

"Payment is a typical two-sided market, card issuers, customers, acquirers, and merchants are the 'bilateral' of the scale, and unlike the 'single market', the degree of interaction between the two sides determines the vitality and scale effect of the payment market. The relevant person in charge of China Construction Bank believes that the "Regulations" will clearly define the business type as "stored value account operation and payment transaction processing", which basically maps the "bilateral" card issuance and acquiring.

Protect the legitimate rights and interests of users

The "Regulations" conscientiously implement the spirit of the Central Financial Work Conference, put 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.

A relevant responsible person of the People's Bank of China said: First, adhere to licensed operations and strictly enforce the 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. The People's Bank of China may, in accordance with the law, impose penalties on relevant payment institutions, such as fines, restrictions on some payment operations, 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 relevant person in charge of China UnionPay believes that a series of provisions of the "Regulations" will help further strengthen the protection of the legitimate rights and interests of financial consumers, and enhance the public's trust in non-bank payment institutions and satisfaction with payment services.

"The protection of the rights and interests of users is the focus of the "Regulations", Alipay will strengthen the protection of the rights and interests of financial consumers, integrate financial consumer protection into corporate governance, corporate culture and business strategy, and solidly improve the level of financial consumer protection. Feng Qiao, deputy general manager of Alipay, said. (Reporter Ma Chunyang)