The CPC Central Committee and the State Council attach great importance to the high-quality development of the payment industry. The 26th meeting of the Central Deep Reform Commission chaired by General Secretary Xi Jinping stressed that it is necessary to improve the rules and systems and risk prevention and control systems in the payment field, and strengthen the supervision of the whole chain and all fields before, during, and after the event. Premier Li Qiang presided over an executive meeting of the State Council to deliberate and approve the Regulations on the Supervision and Administration of Non-bank Payment Institutions (hereinafter referred to as the "Regulations"), and recently signed a decree of the State Council to officially promulgate it. The Regulations are the first administrative regulations in the financial sector issued after the Central Financial Work Conference, and are an important legal guarantee to promote the standardized and healthy development of the non-bank payment industry, which is of milestone significance.
1. The non-bank payment industry in mainland China has entered a mature period
In recent years, the People's Bank of China has conscientiously implemented the decisions and arrangements of the Party Central Committee and the State Council, guided non-bank payment institutions (hereinafter referred to as payment institutions) to continuously improve the level of payment services, increased support for the real economy, established and improved supervision and management mechanisms, prudently prevented and resolved risks, and promoted the stable and healthy development of the non-bank payment industry.
(1) The quality and efficiency of serving the real economy have been continuously improved. Since 2004, payment institutions have emerged with the rapid development of e-commerce in mainland China. The People's Bank of China adheres to guiding payment institutions to firmly establish the concept of "payment for the people", promotes the sustainable and healthy development of new formats and new models such as mobile payment and barcode payment, and accelerates the payment industry into the era of mobile payment and online payment, with a penetration rate of 86%, ranking at the world's leading level. In the past decade, the compound annual growth rate of the number and value of transactions of payment institutions in mainland China has reached 46% and 41%, and in 2022, the number of transactions and the amount of payment institutions will exceed one trillion yuan, with an amount of nearly 400 trillion yuan, effectively serving more than 1 billion individuals and tens of millions of merchants. At present, the average rate of payment services does not exceed 0.6%, which is much lower than that of European and American countries. Fast, safe and convenient modern payment services have played an important role in supporting the stable development of the real economy, and have become one of the characteristic highlights and important symbols of financial services in mainland China, and are the concrete embodiment of exploring the road of financial development with Chinese characteristics.
(2) Insist on paying equal attention to development and standardization. The People's Bank of China has always comprehensively strengthened supervision and prevented and resolved risks throughout all stages of development of payment institutions. In 2010, the Measures for the Administration of Payment Services of Non-Financial Institutions were promulgated, which included payment institutions in the supervision and issued nearly 30 regulatory documents to promote the standardization and development of payment institutions in the process of development. Resolutely break down inter-agency barriers, promote payment interconnection, access to major mobile payment scenarios such as "UnionPay" and other e-wallets, and make positive progress in mutual recognition of various QR code scans. Since 2016, efforts have been made to deepen the supply-side structural reform of the payment service market, combined with the special rectification of Internet financial risks, and guided high-risk institutions to exit the market in an orderly manner, reducing the total number of payment institutions from 271 to the current 185. From 2016 to June 2023, more than 490 payment institutions were investigated and punished.
(3) Establish and complete long-term mechanisms for the supervision of large-scale payment platform enterprises. In recent years, the People's Bank of China has urged online platform enterprises to rectify payment business violations, disconnect payment institutions from direct connections with banks, implement centralized depository of customer reserves, dismantle the "payment + clearing" chain of large payment institutions, improve transaction transparency, and effectively prevent the risk of misappropriation of funds. In accordance with the deployment of the Central Deep Reform Commission, we will work with relevant departments to establish a long-term mechanism for joint supervision of large-scale payment platform enterprises, implement normalized supervision, and promote the standardized and healthy development of payment and financial technology.
Second, the legislative ideas and main contents of the "Regulations".
As the non-bank payment industry moves from a period of rapid development to a mature period, some problems are gradually coming to light. For example, the legal level of the regulatory system is low, some policies are relatively outdated, and it is difficult to meet the needs of the rapid development of payment business; the development of the industry is still unbalanced and inadequate, and some payment institutions carry out business in violation of regulations. In response to these problems, since 2018, the Ministry of Justice and the People's Bank of China, on the basis of systematically sorting out and summarizing the development and regulatory practices of the industry, have worked with relevant departments to study and draft the Regulations, repeatedly soliciting the opinions of payment institutions, commercial banks, clearing institutions and other market institutions, as well as relevant departments, local governments, industry associations, etc., and soliciting opinions from the public, fully absorbing the opinions and suggestions of all parties and responding to concerns.
The general idea of the "Regulations" is to implement the decisions and arrangements of the CPC Central Committee and the State Council, coordinate development and security, and comprehensively strengthen the supervision of the whole chain and cycle of the non-bank payment industry with the fundamental purpose of serving the real economy. The Regulations are divided into 6 chapters, including General Provisions, Establishment, Alteration and Termination, Payment Business Rules, Supervision and Management, Legal Liability, and Supplementary Provisions, with a total of 60 articles. The main contents are as follows:
(1) Persist in the licensed operation of payment institutions and strictly enforce the entry threshold. The first is to implement access management for payment institutions in accordance with the principle of "first license and then license", and make it clear that the establishment of payment institutions must be approved by the People's Bank of China. The second is to stipulate the access conditions for registered capital, major shareholders and actual controllers, senior executives, etc., and strictly control the entry requirements, and require that the relevant conditions should continue to comply with regulatory requirements, and changes must be subject to approval. Third, it is clarified that payment institutions shall aim to provide small-amount and convenient payment services; without approval, they shall not engage in other businesses that require approval in accordance with the law, and shall not engage in or covertly engage in liquidation business. The fourth is to implement normalized withdrawal management, clarify that the withdrawal of payment institutions should be subject to the supervision of the People's Bank of China, and formulate a plan to effectively protect the security of user funds and information.
(2) Improve payment business rules and strengthen risk management. The first is to meet the needs of payment business development, divide payment business into two categories: stored value account operation and payment transaction processing, and authorize the People's Bank of China to formulate specific rules. The second is to clarify the management requirements of payment business. It stipulates that payment institutions shall improve business management and other systems, and have business systems, facilities and technologies that meet the requirements to ensure business continuity, security, and traceability. The third is to strengthen the management requirements for payment accounts, reserves and payment instructions. It is required to open a payment account in the user's real name, not to misappropriate, occupy or borrow customer reserves, and not to forge or alter payment instructions. Fourth, it is necessary to consolidate the responsibilities of payment institutions such as due diligence and risk monitoring, and must not entrust a third party to handle core business and technical services involving capital security and information security.
(3) Strengthen the protection of users' rights and interests. The first is to stipulate that payment institutions shall formulate the terms of the agreement in accordance with the principle of fairness to protect users' right to know and the right to choose. The second is to pay attention to the protection of user information, and clarify the relevant requirements for information processing, information confidentiality and information sharing. The third is to stipulate that the price is clearly marked, and the payment institution is required to reasonably determine and disclose the charging items and charging standards of the payment business; and the fourth is to clarify that the payment institution shall properly handle disputes with users, perform the main responsibility for handling complaints, and effectively protect the legitimate rights and interests of users.
(4) Strengthen supervision and management. The first is to clarify regulatory responsibilities. It stipulates that the People's Bank of China shall supervise and administer payment institutions in accordance with the law, and shall have the right to take regulatory measures such as inspection and investigation and risk disposal measures. The second is to stipulate that the controlling shareholders and actual controllers of payment institutions shall comply with the provisions on equity management, and that payment institutions shall perform their obligations to report major events. Third, it is clarified that payment institutions shall not engage in monopolistic or unfair competition behaviors that impede the order of fair competition in the market. The fourth is to give full play to the joint force of supervision, stipulating that local governments should cooperate with the People's Bank of China to do a good job in handling relevant risks. In addition, the "Regulations" also stipulate the legal liability of payment institutions for violations of laws and regulations, and for some violations of laws and regulations that are serious or fail to be corrected within the time limit, in addition to financial penalties, they may also restrict part of the payment business, order them to suspend business for rectification, and even revoke their licenses.
The "Regulations" have upgraded the effective practices in regulatory work in recent years to administrative regulations, and formed an effective connection with the "Administrative Licensing Law", "Administrative Punishment Law", "Anti-Telecommunications Network Fraud Law" and other laws, laying a solid legal foundation for further improving the long-term mechanism for the healthy development of the industry.
3. Strengthen the implementation of the "Regulations" and promote the sustained and high-quality development of the non-bank payment industry
In the next step, the People's Bank of China will conscientiously implement the spirit of the 20th CPC National Congress and the Second Plenary Session of the 20th CPC Central Committee, implement the decisions and arrangements of the Central Financial Work Conference and the Central Economic Work Conference, promote the implementation of the requirements of the Regulations in accordance with the requirements of the executive meeting of the State Council, practice the concept of "payment for the people", strictly administer according to law, strengthen industry supervision, guide payment institutions to better serve the real economy, and promote the high-quality development of the non-bank payment industry.
(1) Deepen the supply-side structural reform of the payment industry. The first is to insist on licensed operation. Strictly do a good job of reviewing the access of payment institutions in accordance with the law, strictly follow the procedures and standards to review all access conditions, strengthen penetrating reviews, and strictly investigate and deal with violations of laws and regulations such as false promises and fraudulent licenses in accordance with the law. The second is to optimize the market structure. Give full play to the joint efforts of relevant parties, in accordance with the principles of marketization and rule of law, and continuously optimize the market structure of payment supply. The third is to improve corporate governance. Guide and urge payment institutions to effectively improve their corporate governance capabilities and levels, improve corporate governance structures and internal control mechanisms, and standardize the behavior of major shareholders and actual controllers.
(2) Strengthen the supervision of the whole chain and the whole cycle. The first is to strengthen regulatory capacity building. The People's Bank of China will always adhere to the tone of strict supervision, strengthen institutional supervision, behavior supervision, functional supervision, penetrating supervision and continuous supervision, adhere to the management of legal and illegal, strictly enforce the law, dare to show the sword, resolutely deal with all kinds of violations of laws and regulations with a "zero tolerance" attitude, severely crack down on unlicensed or over-the-scope payment business, and ensure that "rules must be followed" and "orders are prohibited". Enhance the transparency of regulatory rules and adopt the same regulatory measures for similar businesses, so as to maintain fair competition order through fair supervision. Early detection and early disposal of risk events, and solid and steady mitigation of risks. The second is to adhere to the strict compliance with the law and regulations. Supervise and urge payment institutions to firmly establish the business philosophy of "compliance is productivity and competitiveness", implement regulatory policies to the letter, and prevent risks such as business alienation, misappropriation of funds, and data leakage. Effectively ensure the security of user funds and information, and do not outsource core business in violation of regulations. Strictly enforce the discipline of the acquiring market to ensure that the payment instructions are true, complete and traceable. It is necessary to strengthen the prevention of risks in the capital chain involving gambling and fraud, and must not provide payment facilitation for illegal fundraising, telecommunications network fraud, and other illegal and criminal activities. The third is to give full play to the joint force of governance. Strengthen coordination with public security, market supervision, foreign exchange and other departments, and further unite the governance efforts of administrative law enforcement, clearing institutions, industry associations and other parties.
(3) Improve the quality and efficiency of serving the real economy. The first is to adhere to the purpose of small amounts of convenience for the people. Payment institutions are encouraged to cooperate with commercial banks to provide payment services for unit users through bank accounts. We will continue to improve the level of inclusive payment, and work hard in key areas such as the transformation of payment for the elderly, mobile payment convenience projects, and rural payment services, so that more people can enjoy payment dividends. The second is to consolidate and improve service capabilities. Guide payment institutions to be guided by market demand, and enhance their ability to empower key industries and serve the real economy. We will continue to implement the relevant initiatives for fee reduction in the early stage, and increase support for the development of small and micro enterprises and individual industrial and commercial households. Benchmark financial infrastructure requirements to ensure business continuity. Clearing institutions should also continue to improve the efficiency of clearing services and do a good job in the management of member institutions. The third is to maintain the order of fair competition in the industry. Guide the leading payment institutions to enhance their awareness of the overall situation, give full play to the role of the "head goose", calculate long-term accounts, pay more attention to the interests of the industry, society and the public, take the lead in fair competition, and promote the healthy development of the industry. Fourth, promote high-level opening-up. Adhere to the equal emphasis on "bringing in" and "going out", further improve the efficiency of domestic and cross-border capital circulation, and improve the level of payment services for new forms of business such as cross-border e-commerce. Encourage payment institutions to play a greater role in the formulation of international standards. All parties are encouraged to give full play to their technological advantages, while stabilizing the coverage of traditional bank card acceptance, further enriching mobile payment products, optimizing the user experience in a targeted manner, and providing convenient payment services for people at home and abroad.
(4) Strengthen organization and implementation. The first is to establish and improve supporting systems and norms. The People's Bank of China will, in accordance with the "Regulations", step up the formulation of implementation rules, further clarify the relevant work requirements and specific implementation measures, and do a good job in the work of enacting, revising, repealing and interpreting relevant rules and normative documents in a timely manner, so as to ensure the integration, coordination and efficiency of relevant systems. The second is to strengthen policy publicity and interpretation. Strengthen the publicity and interpretation of the "Regulations", include the "Regulations" as an important part of the financial popularization of law, and make good use of online and offline methods, so that payment institutions and the public can fully understand the policy measures and policy intentions, answer questions and solve doubts in a targeted manner, and properly respond to social concerns. The third is to implement various regulatory requirements. Fully understand the importance and urgency of implementing the "Regulations", strictly enforce the law according to the requirements of the "Regulations", and implement the provisions of the "Regulations" into every daily supervision work. Guide payment institutions to pay close attention to the provisions of the "Regulations" and implement the provisions of the "Regulations" into various internal systems such as compliance management and risk management.
(The author is a member of the Party Committee and deputy governor of the People's Bank of China)
Source: Financial Times client
Artist: 张青松
Editor: Yang Zhiyuan
Email: [email protected]