Ban looms for pay­ment agen­cies

Third-party pay­ing plat­forms re­quired to de­posit cus­tomer funds in banks

China Daily (Hong Kong) - - FRONT PAGE - By WANG YANFEI and HE WEI Con­tact the writ­ers at wangyan­fei@ chi­ and hewei@chi­

China’s cen­tral bank, or PBOC, said on Fri­day that it will even­tu­ally ban all non­bank pay­ment agen­cies, in­clud­ing Ali­pay, from us­ing clients’ money. As a first step, it will re­quire all plat­forms to de­posit some 20 per­cent of clients’ funds to ap­pointed bank ac­counts.

The move is the lat­est step taken by the cen­tral bank to tackle the fi­nan­cial risks caused by a ris­ing num­ber of in­sti­tu­tions found il­le­gally em­bez­zling the money.

Start­ing from April 17, a to­tal of 267 third-party or­ga­ni­za­tions with the cen­tral bank’s li­censes in China, in­clud­ing Alibaba-owned Ali­pay, have to sub­mit around 20 per­cent of pro­vi­sions to a sin­gle ac­count opened in a com­mer­cial bank, with the cen­tral bank’s ap­proval.

Cus­tomer pro­vi­sions re­fer to the money held by third­party or­ga­ni­za­tions that are not the prop­erty of the or­ga­ni­za­tion.

The ex­act amount handed in by each in­sti­tu­tion will be cal­cu­lated based upon the daily av­er­age bal­ance of the pro­vi­sions in the pre­vi­ous quar­ter, and will be ad­justed quar­terly there­after.

“The 20 per­cent level aims to leave time for in­sti­tu­tions to adapt to new rules,” said Xie Zhong, head of the cen­tral bank’s pay­ment and set­tle­ment depart­ment. “The fi­nal level will be 100 per­cent,” mean­ing that the cen­tral bank will be the only author­ity gov­ern­ing pro­vi­sions.

Xie did not pro­vide a spe­cific time­line for ad­just­ing the level.

The move comes af­ter the cen­tral bank de­cided to es­tab­lish a clear­ing­house for on­line trans­ac­tions ear­lier last year, aim­ing to trim fi­nan­cial risks by dis­con­nect­ing the di­rect clear­ing business from third-party pay­ment firms and banks.

The clear­ing­house, which can be an­other choice apart from com­mer­cial banks to keep cus­tody of pro­vi­sions, will be launched in March this year, ac­cord­ing to Xie.

Li Ai­jun, a law pro­fes­sor with the China Univer­sity of Po­lit­i­cal Sci­ence and Law, said the new rules would not bring ma­jor im­pacts to the in­come level of the com­pa­nies.

“The new rules would hit small-sized in­sti­tu­tions that are more vul­ner­a­ble to fi­nan­cial risks,” she said.

Li said she be­lieves it will not take long for the cen­tral bank to in­crease the level to 100 per­cent, since risks have emerged quickly in re­cent years in the ever ex­pand­ing mar­ket.

The third-party on­line pay­ment mar­ket in China at­tained a to­tal trans­ac­tion value of 4.65 tril­lion yuan ($674 bil­lion) in the sec­ond quar­ter of 2016, up 6.5 per­cent quar­ter-to-quar­ter ac­cord­ing to the lat­est data from Analysis International.

A to­tal of 460 bil­lion yuan of cus­tomer pro­vi­sions have been re­served by third-party in­sti­tu­tions as of the third quar­ter of last year, ac­cord­ing to the cen­tral bank.

By the end of last year, more than 30 third-party in­sti­tu­tions were fined due to il­le­gally em­bez­zling pro­vi­sions, data from the Chi­nese Academy of So­cial Sciences showed.

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