The draft new rules suggest that the People’s Bank of China may revoke the license of a company that has committed serious violations of requirements for combating money laundering and terrorist financing.
China’s central bank has proposed strengthening antitrust measures to contain the payment systems that dominate the country’s non-bank payments industry. According to Reuters, the draft regulation published on Wednesday suggests that the People’s Bank of China (PBoC) will be able to recommend that the State Council’s Antimonopoly Committee impose sanctions on an abusive company or even shut down an institution if its activities “impede the development of the payment services market.”
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Currently, there are 233 registered companies in China that hold a license to provide payment services. According to the investment bank JPMorgan, almost 54% of the market belongs to the Alipay payment system from the fintech company Ant Group. The second largest player is WeChat Pay, with Tencent’s payments business accounting for 39% of the market.
It was reported last July that the PBoC is asking the Antimonopoly Committee to initiate an investigation into WeChat and Alipay. The regulator believes that these payment systems are using their dominant position to suppress competition. The companies tried to avoid investigation by lobbying for their interests among officials, however, apparently, their efforts were unsuccessful.
According to the draft rules, PBoC will “negotiate” with companies whose market share in the non-bank payment services market will reach one third of its volume. The dominant position will also be considered a situation in which the combined share of two players will reach half of the market volume.
The draft also stipulates that non-bank payment companies must comply with PBoC requirements for combating money laundering and terrorist financing. In the event of serious violations of these requirements, the regulator can revoke the company’s license to provide payment services.
Read also: China believes fintech companies should be regulated like banks
At the end of last year, the Chinese authorities launched a massive campaign to combat the monopoly on the domestic market. For example, in November, regulators presented operating rules for Internet platforms, which are aimed at countering monopolistic practices in the e-commerce and payment services markets. For example, once the rules are approved, market participants will not be able to use the popular practice of “choosing one of the two”, the essence of which is that brands are prohibited from listing their products on multiple platforms at once.