China Strengthens Supervision and Interconnection of Payment Environment

The People’s Bank of China (PBoC) has punished 1,436 banks and payment institutions and issued fines totaling 1.13 billion yuan ($176 million) since 2016, said Fan Yifei, the Deputy Governor of PBoC at the 10th China Payment and Clearing Forum held at the end of September.

In addition, the PBoC has guided 22 payment institutions to voluntarily withdraw from the market, refused to renew 17 payment institutions, and revoked the business licenses of two payment institutions that seriously violated regulations.

Since the establishment of the payment business license system in 2010, China’s payment market has maintained high-speed development, with the number and scale of payment institutions rising rapidly. Nowadays, China’s non-bank payment market ranks the first in the world.

However, with the rapid development of the industry, chaos has gradually been exposed. For example, some institutions illegally engage in payment business without permission. In addition, risky behavior such as illegal operations and misappropriation of customers’ reserve funds also occur from time to time, and some institutions provide payment means for gray market trading or even act as channels for illegal and criminal activities such as money laundering.

According to the latest data, the PBoC has assisted in investigating more than 5,700 gambling-related cases and frozen funds of 19.4 billion yuan since 2020. Suspicious gambling-related transactions in major payment channels have dropped by over 50% compared with the beginning of 2020, and the average monthly bank accounts have dropped by 91% year-on-year. Financial punishments have been imposed on 52,000 units and individuals who illegally purchased and sold accounts.

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Aiming at the outstanding problems existing within platform enterprises currently engaged in payment and other financial services, the central bank talked with all platform enterprises and asked them to implement various rectification requirements. In this context, the pace of interconnection in the payment field is accelerating. Pinduoduo and Meituan have been connected to more payment channels, including WeChat Payment, Alipay, Unionpay Quick Pass, Apple Payment and so on. UnionPay QuickPass is now accessible on WeChat mini programs and Taobao, while WeChat payment collection code and Unionpay QuickPass App can recognize and scan each other.