Government and Policy

China issues new rule on online third-party payment

(Xinhua)
Updated: 2011-05-28 19:21
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BEIJING - The issue of third-party online payment permits in China this week will boost the sector's development through giving it a legal status, analysts said.

The People's Bank of China (PBOC), or the central bank, on Thursday announced its first batch of electronic payment licenses to 27 qualified third-party online payment platforms, including Alipay, Tenpay and 99bill.

It also stipulated that all the third-party payment businesses should obtain licenses before September, or cease doing business.

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The move has long been awaited after the central bank said in June last year that non-financial institution payment service would be regulated, and that all businesses involved in the service must get licenses before September 1, 2011.

The license covers payment transactions such as Internet payment, mobile phone payment, bank card acquiring service, issuance and accept of prepaid cards and currency exchange.

The move provides a legal status for the third-party payment sector so that it can develop in a more standard and healthy way, said Zhang Meng, an analyst with Analysys International, an Internet market information provider.

Third-party payment enterprises refer to those non-financial operators who work as the third party between buyers and sellers to provide payment settlement through Internet, telephones or mobile phones.

China has the world's highest number of Internet users, with about 457 million netizens, among whom 148 million were active online shoppers as of the end of last year.

China's online payment topped 1.09 trillion yuan ($167.29 billion) last year. The figure was 397.3 billion yuan in the first quarter this year, almost doubled year-on-year.

99bill CEO Guan Guoguang called the issue of the third-party payment licenses "a milestone" for China's e-payment sector.

Requiring that enterprises must be licensed to operate e-payment businesses will help standardize the sector, improve services and boost integration of e-payment and e-commerce, said Guan.

The first group of e-payment license holders include Alipay.com Co. Ltd, a unit of Alibaba Group Holding which owns the country's largest e-commerce website Alibaba.com Co. Ltd.; China UMS, a unit of China UnionPay Co. Ltd; Tenpay.com, an e-payment platform developed by Chinese Internet giant Tencent Holdings and Shengfutong, launched by Shanda Interactive Entertainment.

Five applicants, however, failed to get licenses.

Businesses with licenses will attract more investment and high-end personnel, says iResearch analyst Cheng Shanbao.

For those without a license, they will be merged or have to pull out of the sector, according to Yeepay CEO Tang Bin.

The central bank selected enterprises that have good management and risk control systems, as well as profit prospects, Zhang Meng said.

Mergers are inevitable as the cut-off date of September 1 is approaching, he added.

The third-party payment enterprises mainly profit from 1 to 4 percent fees, but analysts believe profits from the fees might be reduced due to fierce competition.

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