China moves to regulate non-bank online payment providers

China moves to regulate non-bank online payment providers

The People's Bank of China (PBoC) is set to take over supervision of non-financial institution payment service providers, creating a regulatory framework for the fast-growing market.

Under the new rules, providers will need to apply to the PBoC for a licence within a year of their introduction in September. Providers will be required to hand over transaction records and report commission rates to the central bank.

The move is designed to improve oversight of the rapidly expanding online payments market - estimated to be worth $81 billion last year - giving non-banks a legal basis for their services.

However, according to the Financial Times, the central bank has excluded companies with foreign capital, affecting not only PayPal but also Alipay because its owner Alibaba counts Yahoo! and Japan's Softbank among its major shareholders.

The FT quotes the Bank: "The business scope for foreign companies, the requirements for foreign investors in such businesses and the investment ratios [for] foreigners will be stipulated separately and reported to the State Council for approval."

China's unwillingness to open up its market to foreign providers recently saw Visa and others players approach the US government about filing a WTO trade complaint against the country for cutting them out of the $723 billion payment processing market.

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