BEIJING, December 17 (Xinhua) – Chinese Premier Li Qiang has signed a decree of the State Council to unveil the Regulations on the Supervision and Administration of Non-bank Payment Institutions (hereinafter referred to as the Regulations), which will take effect on May 1, 2024.
The Central Committee of the Communist Party of China (CPC) and the State Council attach great importance to the development and risk management of the non-bank payment sector. In recent years, fast-growing non-bank payment institutions in China have played an important role in boosting transactions and market prosperity, and made a valuable contribution to the development of the real economy and the improvement of people’s livelihoods. The Regulations is meant to promote the law-based supervision and administration of such institutions and their business operations, facilitate the sound and healthy development of the sector, protect customers’ legal rights and interests, and help the institutions better serve the real economy and meet the needs of customers for diversified payment methods. With six chapters and 60 articles, the Regulations focuses on the following aspects:
First, the Regulations clarifies the definition of non-bank payment institutions and their establishment requirements. Non-bank payment institutions are defined as companies, other than banking financial institutions, that transfer money according to electronic payment instructions submitted by users. The Regulations stipulates that the establishment of a non-bank payment institution should be approved by the People’s Bank of China (PBOC), specifies the conditions for its establishment, and imposes strict requirements for market access. The Regulations makes it clear that such institutions should provide small-value and convenient payment services. And Without approval, they should not engage in other businesses that are subject to approval according to law. They are not allowed to conduct clearing business directly or in disguise.
Second, the Regulations refines payment-related rules. To meet the needs for development of payment business, the Regulations divides the payment business of non-bank institutions into two types: stored-value account operation and payment transaction processing. The PBOC is authorized to formulate rules pertaining to the payment business. The Regulations clarifies business management requirements by stipulating that non-bank payment institutions should have sound mechanisms such as the business management mechanism and have eligible business systems, facilities and technologies, so as to ensure uninterrupted, safe and traceable payment services. The Regulations also provides clear management rules for payment accounts, reserve funds and payment instructions, requires that payment accounts be opened in the user’s real name, and states that non-bank payment institutions are not allowed to misappropriate, occupy or borrow customer reserve funds and are prohibited from forging or altering payment instructions, so as to guard against risks in the non-bank payment sector.
Third, the Regulations states the purpose of protecting users’ legitimate rights and interests. Non-bank payment institutions are asked to sign payment service agreements with users, whose terms should be drawn up in accordance with the principle of fairness, according to the Regulations. Such institutions should safeguard user funds and information, not entrust relevant core business and technical services to a third party, properly keep user information and transaction records, establish an effective due diligence system, enhance risk management, and take effective measures to ensure the security of payment accounts and guard against illicit fundraising, telecom fraud, money laundering, gambling and other criminal activities, the Regulations notes.
Fourth, the Regulations clarifies the regulatory and legal responsibilities of related parties. The Regulations stipulates that the supervision and administration of non-bank payment institutions should be aligned with the guidelines, principles, policies, decisions and plans of the Party and the country, with a focus on serving the real economy, striking a balance between security and development, and maintaining fair competition order. The Regulations defines the supervisory and administrative duties and measures of the PBOC as well as its risk disposal methods and requires local governments to cooperate with the PBOC in addressing risks. In addition, the Regulations sets out the legal responsibilities for violations of the law.
