PBoC Releases Third-party Payment Draft Regulations
21st Century Business Herald, 3/15/14
According to an industry insider, the People's Bank of China (PBoC), China's central bank, recently issued draft regulations governing China's third-party payment and mobile payment industries. The PBoC is seeking feedback on the regulations from market players.
The draft regulations stipulate that single money transfers though individual third-party payment accounts cannot exceed RMB 1,000, and cumulative yearly transfers cannot exceed RMB 10,000. Single purchases cannot exceed RMB 5,000, and total monthly purchases cannot exceed RMB 10,000. Any transactions in excess of these amounts should be handled through customers' traditional bank accounts.
The draft regulations stipulate that payment operators cannot open "payment accounts" on behalf of financial institutions. It is unclear what the PBoC means by "payment accounts," according to a legal representative from an unnamed payment operator, but the regulations may imply that limits will be placed on purchases of Chinese third-party payment processor Alipay's Yu'e Bao account balance value-added service (VAS). If the draft regulations pass, cumulative purchases of internet finance products will be limited to RMB 10,000, according to a representative from Chinese e-commerce conglomerate Alibaba Group's small and micro loan subsidiary Chongqing Alibaba Small and Micro Loans.
Funds in individual payment accounts must be drawn from debit accounts under the same name. This rule may influence Alipay's funds transfer feature.
Online payment operators cannot provide online payment services for transactions at physical stores.
The traditional offline payment system is comprised of acquirers, automated clearing houses, and card issuers. Acquirers and card issuers can be banks or third-party payment operators, while China UnionPay is the only automated clearing house that can be used in China.
According to a payment operator insider, offline third-party payment firms get a portion of acquirer revenue from bank card transactions. Depending on the industry, merchants are charged transaction fees ranging from 0.5% to 4.0% for offline card transactions. Service charges primarily follow a 7:2:1 revenue split, where 70% of the fee goes to the card issuing bank, 20% goes to the acquirer, and 10% goes to the automated clearing house, namely China UnionPay.
Currently, Alipay's QR code payment system can directly bypass China UnionPay, with Alipay collecting a service fee directly from merchants. Alipay then pays a yearly fee to banks based upon an agreed upon rate.
Editor's Note: For more information on this topic, please see "PBoC Suspends Alipay, Tencent Online Credit Cards," MD 3/14/14 issue.
Keywords: Internet Alipay mobile payment China UnionPay People's Bank of China third-party payment online payment Alibaba Group Yu'e Bao regulation e-payment financial services
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