On­line pay gets more over­sight

Cen­tral clear­ing­house to avoid fi­nan­cial ‘sys­tem­atic risks’

China Daily (Hong Kong) - - FRONT PAGE - By HE WEI in Shang­hai hewei@chi­nadaily.com.cn

The estab­lish­ment of a cen­tral­ized clear­ing­house for on­line pay­ments sug­gests that Bei­jing is tight­en­ing its su­per­vi­sion over third-party pay­ments as part of ef­forts to up­hold fi­nan­cial sta­bil­ity in the coun­try.

Un­der a reg­u­la­tion re­leased this week by the Peo­ple’s Bank of China, the cen­tral bank, third-party pay­ment firms have to con­nect to the new plat­form by Oct 15 and channel all their pay­ments through it by June 30. Presently, such firms are di­rectly linked to banks for de facto in­ter­bank pay­ment.

The new reg­u­la­tion will help rein in “sys­tem­atic risks” in the fi­nan­cial sys­tem and re­move the hur­dles be­tween banks and all types of pay­ment firms, said Mu Hai­jie, se­nior vice-pres­i­dent of China PnR, a pay­ment provider based in Shang­hai that holds a 1.18 per­cent in­ter­est in the new ven­ture.

“The channel will lower costs and raise ef­fi­ciency by of­fer­ing uni­fied ac­cess to all banks. We welcome the move and are in the process of get­ting con­nected to the new plat­form,” she said.

The re­form also could ef­fec­tively pre­vent il­le­gal ac­tiv­i­ties such as money laun­der­ing, which in turn trans­lates to a more se­cure on­line pay­ment en­vi­ron­ment for cus­tomers, said Wang Pengbo, an an­a­lyst at Bei­jing­based con­sul­tancy Analysys. Wang said no change in user ex­pe­ri­ence is ex­pected.

The On­line Set­tle­ment Plat­form for Non-Bank Pay­ment In­sti­tu­tions, the clear­ing­house, is owned by a num­ber of ma­jor in­sti­tu­tions. Seven units un­der the aus­pices of the Peo­ple’s Bank of China have a 37 per­cent stake while Alibaba af­fil­i­ate Ant Fi­nan­cial and Ten­cent’s Ten­pay each own 9.6 per­cent. The re­main­ing shares are owned by 36 smaller on­line play­ers, in­clud­ing UnionPay.

The cen­tral gov­ern­ment has in the past few months sought to place greater ac­count­abil­ity on reg­u­la­tors to safe­guard fi­nan­cial sta­bil­ity, as ex­em­pli­fied by its an­nounce­ment in July that it would es­tab­lish a com­mit­tee un­der the State Coun­cil, China’s Cabi­net, to im­prove reg­u­la­tion ef­fec­tive­ness on

fi­nan­cial mat­ters.

Hav­ing pay­ment firms route their trans­ac­tions through this cen­tral­ized plat­form is likely to un­der­cut the dom­i­nance of tech giants like Alibaba and Ten­cent whose bi­lat­eral set­tle­ment model with banks by­passes the cen­tral bank’s mon­i­tor, mak­ing it dif­fi­cult to track cap­i­tal flow, in­dus­try ob­servers said.

In fact, the cen­tral bank has al­ready in­structed Ant Fi­nan­cial to drop the use of the term “cash­less so­ci­ety” in its mas­sive mar­ket­ing cam­paign to pro­mote its pay­ment ser­vice.

The cen­tral bank told China Daily that it has not given Ant Fi­nan­cial de­tailed guide­lines re­gard­ing the im­prove­ment of reg­u­la­tion ef­fec­tive­ness. How­ever, the com­pany has al­ready made changes to its op­er­a­tions, in­clud­ing the ad­di­tion of cash pay­ment points at Hema Xian­sheng, an Alibaba-in­vested fresh pro­duce chain where all trans­ac­tions could pre­vi­ously only be made us­ing Ali­pay.

Ant Fi­nan­cial and Ten­cent, which ac­cord­ing to i Re­search make up the lion’s share of China’s 22.7 tril­lion ($3.4 tril­lion) mo­bile pay­ment mar­ket, have just com­pleted a week­long battle in which they dished out gen­er­ous in­cen­tives to lure users to their pay­ment sys­tems.

Ant said in a state­ment that it will com­ply with the re­quire­ments of the cen­tral bank. Ten­cent said it will co­op­er­ate with reg­u­la­tors and other rel­e­vant par­ties to build a jus­ti­fied, fair and source-shar­ing plat­form for a non­bank pay­ment net­work.

“On­line pay­ments gen­er­ate a sig­nif­i­cant amount of data that pay­ment firms can use to their ben­e­fit,” said Shaun Rein, man­ag­ing di­rec­tor of China Mar­ket Re­search Group.

“The gov­ern­ment should re­ally step up to limit their power and en­sure fi­nan­cial se­cu­rity.”

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