China proposes tighter leash on non-bank payment offerings

Details: James Barton; Category: Mobile Finance; 21 January 2021; 8461 views

China’s central bank is seeking feedback on its antitrust proposals for stricter regulation of payment services provided by non-bank companies, such as Alibaba and Tencent.

The People’s Bank of China said that its proposals were aimed at establishing the “relevant market” for payment services and setting “the standards for determining market dominance.” It noted that the rules would provide payment companies with an impetus to continue innovating with their products and services to adapt to the different needs of customers.

The proposals would grant the central bank the authority to request that the State Council’s antitrust committee take action to prevent a company from abusing its market dominance. The committee has the power to break up companies that fail to comply with fair competition principles.

At present, a non-bank company would need to control 50% of the electronic payments market before any regulatory action could be taken. Senior executives would be warned of any perceived abuse of market dominance and could be fined as much as CNY500,000 (US$77,361) if they failed to take action after a fair warning.

Alipay and WeChat Pay, the respective payment services from Alibaba and Tencent, are the two dominant forces in China’s online payments space. With both services now offering additional financial capabilities including investment, the regulator has deemed it necessary to scrutinise them more intensively.