China Economic Weekly reporter Zhang Yan reported from Beijing.
After nearly three years of soliciting opinions, the official draft of the Regulations on the Supervision and Administration of Non-bank Payment Institutions (hereinafter referred to as the "Regulations") was finally implemented on December 17 and will come into force on May 1, 2024.
According to the relevant data released by the central bank, as of the end of September this year, there were 185 non-bank payment institutions (hereinafter referred to as "payment institutions") in the country, and the annual payment business in 2022 exceeded 1 trillion yuan with an amount of nearly 400 trillion yuan, accounting for about % of the total electronic payment business in the country and an average daily reserve balance of 209 trillion yuan, serving more than 1 billion individuals and tens of millions of merchants.
Consolidate the legal foundation for the standardized development of payment institutions.
This is the first administrative regulation in the financial field issued after the first financial work conference.
When answering reporters' questions on the "Regulations", the heads of the Ministry of Justice and the Central Bank said that upgrading the effective system in regulatory practice to administrative regulations and further consolidating the legal foundation for the standardized and healthy development of payment institutions is conducive to creating a law-based business environment, stabilizing the expectations of all parties, stimulating market vitality, and also helping to protect the legitimate rights and interests of users, prevent and resolve risks, and promote the high-quality development of the non-bank payment industry.
With the rise of new business formats such as digital economy and e-commerce in China, non-bank payment business has played an important role in the field of small-amount and convenient payment, and is also related to the security of users' funds and information security, and is closely related to other financial businesses. In recent years, positive results have been achieved in the prevention and resolution of financial risks in the payment field, but the phenomenon of illegal operation of some payment institutions has also occurred from time to time.
The responsible persons of the Ministry of Justice and the central bank pointed out that individual payment institutions have misappropriated user funds in violation of regulations, leaked or improperly collected and used user information. There are also individual payment institutions that take risks to provide fund transfer channels for illegal and criminal activities such as telecommunications network fraud and cross-border gambling.
In recent years, there have been some risks and problems in the rapid development of payment institutions, and at the same time, due to the particularity of payment as a transaction terminal, there has also been a tendency to attribute the risk of economic activities to the payment link, which has also led to the 'expected weakening' of the healthy development of the industry. Yang Tao, deputy director of the National Finance and Development Laboratory of the Chinese Academy of Social Sciences and director of the Payment and Clearing Research Center, told the China Economic Weekly reporter that the introduction of the "Regulations" has further enhanced the legal and normative level of the industry, helped to continuously optimize the industry order and business environment, and conformed to the strategic direction of supporting private enterprises and private capital.
In fact, in response to the various problems and challenges exposed by non-bank payment institutions, relevant industry regulatory rules are also constantly being explored and improved. In October 2005, the People's Bank of China (PBOC) promulgated the Electronic Payment Guidelines No. 1 in the form of an announcement, bringing electronic payment into the regulatory scope for the first timeIn June 2010, the Measures for the Administration of Payment Services for Non-bank Financial Institutions were promulgated, clarifying the definition and business scope of non-bank payment institutions. The promulgation of the "Regulations" has incorporated non-bank payments into the entire financial system and risk regulatory framework, further improving the regulatory system and mechanism.
Yang Tao said that the effect of financial services for the real economy is ultimately reflected in the customer experience, which is to adhere to the political and people's nature of financial work. It is foreseeable that the promulgation of the "Regulations" will prompt payment institutions to meet the growing diversified payment needs of the people in a more compliant, timely, accurate and appropriate manner.
Strengthen full-chain and full-cycle supervision, and further standardize risks.
The "Regulations" promulgated this time have a total of 6 chapters and 60 articles, which have been strengthened from the following four aspects: adhere to licensed operation and strict entry thresholds;Improve payment business rules and strengthen risk management;Strengthen the protection of users' rights and interests;Increase the extent of punishment for serious violations of laws and regulations in accordance with law.
The "Regulations" more systematically clarify the definition and establishment of payment institutions, adhere to licensed operation and strict entry thresholds, and also establish and improve the normalized exit mechanism of institutions with serious violations of laws and regulations, which makes the industry's 'entry and exit mechanism' more clear and reasonable, and the path to improve the quality and efficiency of the industry through 'survival of the fittest' and 'reward and punishment of inferior' is clearer. Yang Tao believes that the "Regulations" put forward more requirements for payment institutions to improve their own service capabilities, which is conducive to guiding the supply-side structural reform of the payment industry and promoting the continuous self-empowerment of payment institutions.
Specifically, the Regulations clarify that non-bank payment institutions shall provide small-amount and convenient payment services for the purpose of providing small-amount and convenient payment services, and shall not engage in other businesses subject to approval in accordance with the law without approval, and shall not engage in or disguised liquidation business.
In terms of strict access thresholds, the Regulations implement access management in accordance with the principle of "first license before license", and specify that the same shareholder shall not directly or indirectly hold more than 10% of the equity or voting rights of two or more non-bank payment institutions of the same business type. The same actual controller must not control two or more non-bank payment institutions of the same business type, except as otherwise provided by the state.
In terms of improving the rules for payment business, the Regulations reclassify payment business into two categories: stored value account operation and payment transaction processing. It has changed the classification method of dividing the payment business into three categories: online payment, bank card acquiring and prepaid card business.
With technological innovation and business development, emerging methods such as barcode payment and face payment have emerged, and the existing classification methods cannot well meet the needs of market development and supervision. The heads of the Ministry of Justice and the central bank said that the new classification method has good scalability and is conducive to preventing regulatory gaps. In addition, the new classification method is based on the business substance and risk characteristics, penetrates the surface form of the payment business, is conducive to unifying the access conditions such as capital and business rule requirements, eliminating regulatory depressions, and forming a fair institutional environment.
In terms of penalties, Chapter 5 of the Regulations comprehensively refines and upgrades the administrative penalties that payment institutions may face through 11 articles. Based on the severity of the violation, three levels of liability for violations are set.
In an interview with China Economic Weekly, the partner authority of Han Kun Law Firm mentioned that the Regulations set a penalty rule of "no one penalty five" (that is, confiscation of illegal gains and a fine of not less than 1 time but not more than 5 times the illegal gains) for all types of violations, which is fully aligned with the rules of Article 46 of the People's Bank of China Law of the People's Republic of China, compared with the previous provisions only set 10,000 for some minor violations The rules for the penalty range of 30,000 yuan have been substantially improved, and it is expected that fines against payment institutions will be more frequent in the future.
The Regulations also pioneered the inclusion of controlling shareholders and actual controllers of payment institutions in the scope of administrative liability, and the regulatory authorities may also directly pursue the responsibilities of controlling shareholders and actual controllers for some violations of payment institutions. At the same time, the authority said.
The requirement for the principle of fair competition remains unchanged.
In the context of economic globalization, the increasing frequency of cross-border transactions has given rise to more demand for cross-border payments and put forward higher requirements for supervision.
In terms of access and supervision, the Regulations clearly state that domestic and foreign-funded payment institutions should be treated equally. Article 2 of the Regulations stipulates that if a non-bank institution intends to provide cross-border payment services to domestic users, it shall establish a non-bank payment institution in China in accordance with the provisions of the Regulations. Article 6 clearly states that the establishment of non-bank payment institutions shall be approved by the People's Bank of China and obtain payment business licenses. Once again, cross-border payment practitioners must hold a domestic payment license. In Article 19, the Regulations also clearly stipulate that "payment institutions providing payment services for cross-border transactions shall comply with the relevant provisions on cross-border payment, cross-border RMB business, foreign exchange management and cross-border data flow".
For a long time, there has been no regulation on cross-border payment business for payment institutions.
1. Clear normative documents, and due to the obvious differences between cross-border payment business and domestic payment business, China's cross-border payment regulatory rules have always been unclear. The authority said that after the "Regulations" establish the regulatory framework of the payment industry, it is believed that the release of cross-border payment management rules can also be expected.
In addition, the Regulations emphasize that "non-bank payment institutions shall not carry out monopolistic or unfair competition acts that impede the order of fair market competition", and stipulate that if the People's Bank of China discovers that non-bank payment is suspected of monopoly or unfair competition in the performance of its duties, it shall transfer the relevant clues to the relevant law enforcement departments and cooperate with them in investigating and handling.
The reporter noted that, compared with the Regulations on Non-bank Payment Institutions (Draft for Comments) issued in 2021, a large number of provisions on anti-monopoly related determinations have been deleted in the officially released Regulations, including the previously defined criteria for determining market dominance.
The issue of payment anti-monopoly is still facing the theoretical level. In fact, there is a difference between the market supervision of the real economy and the supervision of the financial market, and the anti-monopoly of the financial market cannot simply apply the experience of the real economy market. To determine whether there is a monopoly in the financial market, it is possible to determine whether the institution has taken advantage of the monopoly position or the disabling threshold to implement methods that harm consumer behavior. Yang Tao said that the "Regulations" show that while promoting payment anti-monopoly to have rules to follow and form a deterrent effect, it is more about returning to the normalized regulatory logic. As far as payment is concerned, in recent years, the regulatory focus related to anti-monopoly has mainly been on capital security, the closed-loop of the "tripartite model", market competition (banks, interbanks, merchants), platform exclusivity (consumers), data protection, and B-end anti-money laundering issues, and the current focus needs to shift from solving problems to improving mechanisms.
Huang Yiping, deputy dean of the National School of Development at Peking University and director of the Center for Digital Finance at Peking University, also wrote that the ideas in the draft are more applicable to traditional industries such as steel and petroleum. In the context of digital technology, it is not necessarily possible to accurately determine whether it is a "monopoly" or not by simply looking at market share, but perhaps more importantly, it is necessary to look at "contestability conditions".
In the field of payment, there is also a market-wide identification problem, if you just look at non-bank payment, the market share of the two leading institutions may have exceeded two-thirds, but non-bank payment only accounts for one percent of the entire payment market, based on narrow payment and broad payment to draw a completely different conclusion. The fact that the Regulations do not adopt the specific market share mentioned in the draft is a welcome change. Huang Yiping wrote.
This article was published in China Economic Weekly Issue 24, 2023).