China cbank de­fends online pay­ment rules

The Pak Banker - - COMPANIES/BOSS -

China's cen­tral bank has moved to de­fend draft rules that would force online pay­ment pro­ces­sors to chan­nel large pay­ments through tra­di­tional bank ac­counts, a re­quire­ment that in­dus­try observers say will sti­fle in­no­va­tion while pro­tect­ing the in­ter­ests of in­cum­bent banks.

The Peo­ple's Bank of China in mid-July laid out a broad reg­u­la­tory frame­work for in­ter­net fi­nance, which in­cludes pay­ments, wealth man­age­ment, peer-to-peer lend­ing and crowd fund­ing, among other ser­vices.

Those guide­lines sought to strike a bal­ance be­tween pro­mot­ing in­no­va­tion by up­starts seek­ing to com­pete with large, sta­te­owned banks, while also im­pos­ing or­der on the chaotic world of in­ter­net fi­nance, where huck­ster­ism has thrived amid a lack of reg­u­la­tion. The PBoC fol­lowed up late on Fri­day with spe­cific rules gov­ern­ing online pay­ments, a sec­tor dom­i­nated by Ali­pay, an af­fil­i­ate of ecom­merce gi­ant Alibaba, and Cai­fu­tong, the pay­ment arm of so­cial media and gam­ing group Ten­cent.

Online pay­ments are ex­pected to hit Rmb11.8tn ($1.9tn) this year, up from Rmb8.1tn in 2014, ac­cord­ing to iRe­search. The rules set a cap on pay­ments by third­party pro­ces­sors of Rmb5000 per client per day and Rmb200,000 per year. Larger pay­ments must be routed through the payer's ac­count at a com­mer­cial bank. Online groups re­acted with dis­may. "It's not even enough to buy one iPhone. If I want to do­nate Rmb210,000 to the Win­ter Olympics, I guess I'd have to spread it over two years," Yi Huan­huan, sec­re­tary-gen­eral of IFC1000, an online fi­nance trade group, wrote in a com­men­tary, ref­er­enc­ing Bei­jing's suc­cess­ful bid to host the 2022 win­ter games. "Ba­si­cally this blocks off the in­dus­try's space for de­vel­op­ment." In an un­usual move, the cen­tral bank is­sued a fol­low-up state­ment at the week­end re­spond­ing to crit­i­cisms of the pay­ment cap.

The PBoC cited data show­ing that 71 per cent of online pay­ment plat­form users made pay­ments of less than Rmb1000 for all of 2014, to sup­port its claim that most users will be un­af­fected by the cap.

The cen­tral bank also clar­i­fied that online pay­ment com­pa­nies can process pay­ments of more than Rmb5000 but that the ex­cess por­tion must be deb­ited di­rectly from a bank ac­count linked to the user's pay­ment plat­form ac­count, rather than from cash al­ready stored on the plat­form.

"Trans­fer lim­its are pro­posed based on a holis­tic con­sid­er­a­tion of pay­ment ef­fi­ciency and con­ve­nience, as well as fac­tors such as anti-money laun­der­ing and client fund se­cu­rity," the cen­tral bank said.

The new rules also for­bid pay­ment com­pa­nies from open­ing ac­counts on be­half of fi­nan­cial in­sti­tu­tions, as well as fi­nan­cial in­ter­me­di­aries in­volved in peer-to-peer lend­ing, crowd­fund­ing, wealth man­age­ment, or for­eign ex­change. In­stead these com­pa­nies' funds must be held at com­mer­cial banks.

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