PBoC has drafted regulation to strengthen supervision over non-banking institutions’ payment services on January 20, as reported by JRJ.com on the same day. Notably, the policy this time adds anti-monopoly measures for the non-banking payments industry. Moreover, the regulation highlights the requirement of non-banking payment institutions’ corporate governance and increases the punishment for violation of such institutions and its employees.
Chinese antitrust experts considered the new rules as a warning to Alibaba-backed [BABA:US] Ant Group and Tencent [0700:HK]. The drafted regulation stipulates that PBoC can advise State Council’s anti-monopoly law-enforcement department to split any non-banking payment company that controls more than 50% of the market, or any two with a combined share of more than 67%. In 2Q20, Alipay and WeChat Pay jointly controlled about 94.4% of China’s mobile payment sector, where Alipay occupied 55.6%, according to iResearch. Nevertheless, other experts pointed out that the domestic electronic payment market scope set in the regulation includes both electronic payments and bank card payments. In such terms, neither Alipay nor WeChat Pay reached a 33% market share, or a dominant market position.
As of December 20, four payment licenses have been officially deregistered in 2020. Since the issuance of payment licenses, a total of 38 payment licenses have been revoked, and the number of remaining payment licenses is now at 233 now. As to new institutions that intend to enter the market, the draft rules also specify the entry threshold with a minimum registered capital of RMB100m. Also, one entity shall not hold more than a 10% equity of two or more non-banking payment institutions, and one actual controller shall not control two or more non-banking payment institutions, restricting companies’ potential monopolistic practices through merges and acquisitions.