Non-bank payment institutions ushered in detailed regulatory rules. On April 22, according to the official website of the People's Bank of China, in order to ensure the implementation of the Regulations on the Supervision and Administration of Non-bank Payment Institutions (hereinafter referred to as the "Administrative Regulations"), the People's Bank of China issued a notice on the "Implementation Rules for the Supervision and Administration of Non-bank Payment Institutions (Draft for Comments)" (hereinafter referred to as the "Implementation Rules") for public comment, and the deadline for feedback is May 22, 2024.
According to the introduction, the Detailed Implementation Rules refer to the structure of the Regulations on the Supervision and Administration of Non-bank Payment Institutions (hereinafter referred to as the "Administrative Regulations"), with a total of six chapters and 80 articles. Detailed requirements are made for changes in payment business rules, the establishment, change and termination of payment institutions, supervision and management, and other contents.
The People's Bank of China pointed out that the "Regulations" is the first administrative regulation in the financial field issued after the Central Financial Work Conference, and it is an inevitable requirement to implement the spirit of the Central Financial Work Conference and promote the healthy development of the payment industry.
Internet payments are classified as stored value account operations in Class I
The payment business division plan was released
In December 2023, the "Management Regulations" were officially announced. Due to the lack of detailed plans, many of the changes proposed in the "Administrative Regulations" need to be clarified, and the payment market as a whole is on the sidelines.
When the "Management Regulations" were officially implemented, opinions began to be solicited on the supporting implementation rules. The "Implementation Rules" provide a more detailed explanation of the various contents, among which in terms of payment business rules, the "Implementation Rules" propose, first, to stipulate that the operation of stored value accounts and payment transaction processing business are subdivided into Class I and Class II respectively, and clarify the correspondence between the old and new classification methods.
Specifically, according to the earlier Measures for the Administration of Payment Services of Non-Financial Institutions, according to the different transaction channels and acceptance terminals, the payment business is divided into online payment, bank card acquiring and prepaid card business. According to the Detailed Implementing Rules, the original Internet payment and mobile phone payment (fixed telephone payment and digital TV payment) are classified as Category I of stored value account operation, and the issuance and acceptance of prepaid cards and the acceptance of prepaid cards are classified as Category II of stored value account operation, and the geographical scope of business remains unchanged.
The original bank card acquiring payment business is classified as Category I of payment transaction processing, and the geographical scope of business remains unchanged, and those that only carry out mobile phone payment, fixed telephone payment, and digital TV payment, and do not carry out Internet payment, are classified as Category II of payment transaction processing. After the reclassification of payment business, the type of business registered in the payment business license of the relevant institution should also be adjusted synchronously.
The readjustment and division of the payment business is also related to the registered capital requirements of the payment institution. According to Article 8 of the Administrative Regulations, the minimum registered capital of a payment institution is RMB 100 million, and the People's Bank of China may adjust the minimum amount according to factors such as the type of business, geographical scope and scale of business of the payment institution.
Further clarification is provided in the Implementing Rules. For example, if you only engage in payment transaction processing Class I business in the place of domicile, the minimum registered capital does not need to be attached. For every additional province, autonomous region or municipality directly under the Central Government outside the place where the business territory is located, the minimum added value of the registered capital shall be increased by RMB 5 million. For the operation of Class I business in stored value accounts, the minimum added value of the registered capital shall be RMB 100 million.
If two or more of the above-mentioned types of business are engaged at the same time, the minimum added value of the registered capital shall be calculated in accordance with the aforesaid provisions. Based on this calculation, the minimum registered capital of a payment institution holding a full license and operating in the country is RMB 400 million.
Wang Pengbo, chief analyst of Broadcom Consulting, pointed out that the division of business types is clear, and all the original business licenses are classified into new classifications. This not only ensures the smooth transition of the original business and licenses, but also reformulates more direct and detailed regulatory provisions according to the characteristics of each institution's business and licenses, so as to ensure the penetration and comprehensiveness of supervision.
"There is no 'one-size-fits-all' registered capital, but 'greater ability, greater responsibility', which is in line with the reality of industry development and the corresponding needs of various business types. Wang Pengbo added.
According to the excess regression method
Net Assets-Linked Provisions
The Beijing Business Daily reporter noted that for the establishment, change and termination of payment institutions, the "Implementation Rules" first clarified the meaning of the main shareholders of payment institutions, that is, shareholders whose capital contribution accounts for more than 10% of the total capital of the payment institution or holds more than 10% of the shares, and at the same time, although the proportion of new capital contributions or shares held is less than 10%, but has a significant impact on the operation and management of the payment institution, such as the dispatch of senior executives to the payment institution through agreements.
In terms of the prudential conditions for the establishment of payment institutions, the Detailed Implementation Rules further require that payment institutions should also meet the conditions of good business conditions, no record of major violations of laws and regulations within the validity period of the payment business license, and no failure to carry out payment business for more than two consecutive years without justifiable reasons.
Regarding this change, Wang Pengbo bluntly said that strengthening shareholder management is to make up for possible regulatory loopholes. The prudential management requirements will affect some institutions that have not carried out actual payment business but want to sell their licenses, restrict the license trading market, and may also affect the subsequent license renewal work of institutions that have already been licensed.
In addition, with regard to the management of reserves, Article 28 of the Regulations proposes that the ratio of the net assets of non-bank payment institutions to the average daily balance of reserves shall comply with the provisions of the People's Bank of China. In the Detailed Implementation Rules, the ratio of the net assets of the payment institution to the average daily balance of the reserve fund is set in stages, and at the same time, clear requirements are made for the time limit for the storage of user information and transaction records, and the requirements for fee adjustment.
According to the Detailed Implementation Rules, the minimum net assets of a payment institution shall be calculated on the basis of the average daily balance of reserves, and shall be recognized by way of excess regression, and the average daily balance of reserves shall be divided into five levels: no more than RMB 50 billion, more than RMB 50 billion to RMB 200 billion, more than RMB 200 billion to RMB 500 billion, more than RMB 500 billion to RMB 1,000 billion, and more than RMB 1,000 billion. 4%, 3%, 2%, 1% calculations.
Where the People's Bank of China designates it as a systemically important non-bank payment institution, it shall also meet the additional proportion requirement. However, the measures for the management of this type of payment institution were formulated separately by the People's Bank of China, and there is no clear classification at present.
In Wang Pengbo's view, higher net assets indicate that payment institutions have strong solvency, lower financial risk and better profitability. Clarifying the minimum amount of net assets of non-bank payment institutions and the ratio of the average daily balance of assets to reserves is an important embodiment of ensuring the safety of the payment system and customers' funds. There are additional requirements for systemically important non-bank payment institutions, which also indicates that the importance of non-bank payment institutions to the financial system and financial security has increased.
Set up an adequate transition period
Rectification of non-compliance will result in termination of payment business
According to the requirements, the "Administrative Regulations" will be officially implemented on May 1, 2024, and this time node is also considered to be a critical moment for the rectification of payment institutions in the industry. However, judging from the Detailed Implementation Rules, there will be a relatively sufficient transition period for the replacement of existing payment institutions.
According to the Detailed Implementing Rules, the transition period for payment institutions is from the effective date of the Detailed Implementation Rules to the expiration date of the validity period of their payment business licenses, and if the transition period is less than 12 months, it will be counted as 12 months.
A reporter from Beijing Business Daily combed through and found that in July 2023, the People's Bank of China disclosed the renewal of the sixth batch of payment institutions' "Payment Business License", of which the validity period of 9 payment institutions' licenses was extended to July 2028, which also means that the batch of institutions is expected to usher in a transition period of up to 4 years.
In addition, the seventh and eighth batches of payment business licenses will expire on July 9, 2024 and March 25, 2025, respectively, and a total of 18 payment institutions are facing renewal tests. How to set up the transition period for the corresponding payment institutions depends on when the Implementing Rules can be officially implemented.
Before the sufficient transition period, payment institutions also need to complete the rectification tasks on time. The Detailed Implementation Rules emphasize that existing payment institutions shall meet the requirements of the Administrative Regulations and the Detailed Implementation Rules on the conditions for the establishment of payment institutions and the ratio of net assets to the average daily balance of reserves before the end of the transition period.
Wang Pengbo said that the People's Bank of China has left a relatively relaxed transition time for payment institutions, and it is expected that after the issuance of the "Implementation Rules", relevant payment institutions will take action one after another to move closer to the relevant rules. On the whole, the release of the "Implementation Rules" can make up for the regulatory gap, continue to build compliance in the payment field, and help form a fairer institutional environment. The clarity of various important concepts and connotations can also further ensure the effective implementation of the Administrative Regulations, which is of great significance for promoting the smooth transition of new and old businesses.
Su Xiaorui, chief researcher of Suxi Zhiyan, said that the "Implementation Rules" for public consultation is a strong supplement to the "Management Regulations" and will help build a smoother bridge between regulatory documents and payment business. The subsequent implementation stage will help guide payment institutions to pay full attention to business details, reduce the misunderstanding bias of documents, and lay a solid foundation for the main line of compliance to run through the front, middle and back processes of the business.
The People's Bank of China also emphasized that the "Implementation Rules" clarify the scope, licensing conditions, and approval process of administrative licensing items for payment institutions, and promote openness, transparency, sufficient basis, and standardized processes for administrative licensing. At the same time, the transition period arrangements and the connection between the old and new payment businesses will be clarified to promote the smooth transition of the non-bank payment market.
Beijing Business Daily reporter Liao Meng