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After three months of public consultation, non-bank payment institutions have officially received new regulations and supporting regulatory details. On July 26, the People's Bank of China's official website officially released the "Implementation Rules of the Regulations on the Supervision and Administration of Non-Bank Payment Institutions" (hereinafter referred to as the "Implementation Rules"), which will take effect from the date of release. The "Administrative Measures for Payment Services of Non-Financial Institutions" (hereinafter referred to as the "Administrative Measures") and the "Implementation Rules of the Administrative Measures for Payment Services of Non-Financial Institutions" are abolished at the same time.

According to the introduction, the Implementation Rules are intended to refine the provisions of the Regulations on the Supervision and Administration of Non-Bank Payment Institutions (hereinafter referred to as the Regulations) and provide a strong institutional guarantee for the standardized and healthy development of payment institutions. The People's Bank of China emphasized that it will strictly implement the relevant provisions of the Regulations and the Implementation Rules, strengthen the full-chain supervision of the non-bank payment industry, and promote the healthy and sustainable development of the non-bank payment industry.

Payment business redelineation

Based on the specific contents of the Regulations and the Implementation Rules, one of the major changes in the actual business operations of payment institutions is the redivision of payment services. According to the earlier Management Measures, payment services were mainly divided into online payment, bank card acquiring and prepaid card services based on different transaction channels and acceptance terminals.

Now, the "Implementation Rules" require that Internet payment and mobile phone payment (fixed-line phone payment, digital TV payment) be classified as stored value account operation Category I, and prepaid card issuance and acceptance, and prepaid card acceptance be classified as stored value account operation Category II; bank card acquiring be classified as payment transaction processing Category I, and mobile phone payment, fixed-line phone payment, and digital TV payment be classified as payment transaction processing Category II.

The "Implementation Rules" mentioned that from the date of implementation of the "Regulations", various payment business rules will temporarily follow the current system regulations such as prepaid cards, online payment, barcode payment, and bank card acquiring.

At a media briefing held by the People's Bank of China on July 26 on "Promoting High-Quality Development of the Payment Industry", Yan Fang, Director of the Payment and Settlement Department of the People's Bank of China, pointed out that the new classification method has better scalability and provides greater space for the development of the payment industry and technological iteration. Regardless of the external form of the payment business, it can be classified and managed according to its substance, which is conducive to achieving "same business, same supervision" and promoting fair competition.

Yan Fang said that the "Implementation Rules" clearly defined the "one-to-one correspondence" between the old and new payment business types. All types of old business types can be classified into the new business classification without changing the original business scope of the payment institution. At the same time, various new business types can also find applicable business rules according to the relevant provisions of the "Regulations" and "Implementation Rules" to ensure that "there is a law to rely on". The People's Bank of China is revising and improving the current system in accordance with the new business classification method. In the future, it will promote the introduction of the system after fully soliciting and absorbing opinions from all parties in accordance with the relevant provisions of the legislative procedure.

Wang Pengbo, chief analyst at Broadcom Consulting, believes that due to the separation of actual business payment and collection, the classification of barcode payment business, which has the highest market penetration rate, is expected to continue to correspond to the business type in the future. For example, institutions such as WeChat Pay and Alipay still provide services to offline physical merchants and must have both "stored value account operation type I" and "payment transaction processing type I" business licenses.

Strengthening shareholder and executive responsibilities

In addition to the various mandatory regulations for the operation of payment institutions, the "Implementation Rules" also draw red lines for the company's "helmsmen".

In terms of shareholders, the "Implementation Rules" point out that the major shareholders of a payment institution refer to shareholders whose capital contribution accounts for more than 10% of the total capital of a non-bank payment institution or whose shares account for more than 10% of the total share capital of a non-bank payment institution; and shareholders whose capital contribution or proportion of shares held is less than 10% but who have a significant impact on the operation and management of the non-bank payment institution.

According to the requirements, new applicants for the establishment of payment institutions must submit a letter of commitment on equity stability and capital replenishment to the local branch of the People's Bank of China, including a commitment that the major shareholder will not change within three years and a commitment that the major shareholder will replenish capital. If a payment institution applies to change the major shareholder or actual controller, it is also required that the existing major shareholder or actual controller has held shares or actually controlled the company for three years, and provide a detailed description of the applicant's basic information, reasons for the change, change plan, and the situation of the major shareholder or actual controller before and after the change.

The "Implementation Rules" emphasize that the People's Bank of China branches should strengthen local management, implement continuous and penetrating supervision on the equity of non-bank payment institutions, promptly grasp the changes in non-major shareholders or beneficial owners that may have a significant impact on the operation and management of non-bank payment institutions, and prevent non-major shareholders or beneficial owners from evading supervision through concerted action arrangements.

In terms of senior management, the Implementation Rules stipulate staffing, job requirements, etc. The Implementation Rules point out that payment institutions should have more than five senior management personnel, including the general manager, deputy general manager, financial director, technical director, and compliance and risk control director.

At the same time, senior management personnel of payment institutions should have the management and operation capabilities required to perform their duties, including independence required for the proposed position, good professional records, etc. Senior management personnel should also have a bachelor's degree or above, and have been engaged in payment settlement, finance, and information processing for more than 2 years, or in accounting, economics, information technology, and law for more than 3 years.

Senior executives or direct business managers of financial institutions have always been the focus of regulatory attention. In major violations of laws and regulations by payment institutions, the relevant responsible persons often cannot escape punishment. According to incomplete statistics from Beijing Business Daily reporters, in the first half of 2024, the third-party payment field received a total of 24 fines, including penalties for senior executives, with a total fine amount of more than 118 million yuan. Among them, there were 10 "double-penalty" fines involving relevant business managers of payment institutions, accounting for more than 40%.

Su Xiaorui, a senior researcher at Suxi Zhiyan, pointed out that the various regulations on senior management mean that the overall level of the management of payment institutions will be improved. It is expected that payment institutions will strictly follow the detailed rules to sort out the qualifications of directors, supervisors and senior management personnel in the future.

Set a clear transition period

With the redivision of payment services, the business licenses held by payment institutions are also facing adjustments. According to the Management Measures, the validity period of payment service licenses of payment institutions is 5 years, which means that payment institutions must renew their licenses every 5 years.

Since the establishment time of each payment institution is different, the expiration date of the payment business license is also different. In this round of changes, the People's Bank of China also clearly set a transition period in the "Implementation Rules". According to the introduction, the transition period is from the implementation date of the "Implementation Rules" to the expiration date of the payment business license. Payment institutions established before the implementation of the "Regulations" that intend to continue to engage in part or all of the approved payment business should apply to the People's Bank of China for a replacement of a long-term payment business license.

In addition, according to the People's Bank of China, some payment institutions need a certain amount of time to adjust to meet the relevant requirements on net assets. In order to ensure a smooth transition, the "Implementation Rules" also set a transition period of the same length for the ratio of net assets to the daily average balance of reserves.

In fact, during the period from soliciting opinions to the official implementation of the Regulations, the payment business licenses of a number of payment institutions expired on July 9, 2024. Judging from the payment business license information published by relevant payment institutions, the business types of payment institutions have been adjusted in accordance with the Implementation Rules, and the validity period indicates that the transition period is until July 9, 2025.

According to information disclosed by the People's Bank of China, for the two batches of payment institutions whose terms expire on July 9, 2024 and March 25, 2025 are close to the implementation date of the "Implementation Rules", the "Implementation Rules" will extend their transition period to 12 months to ensure that these two batches of payment institutions have sufficient preparation time.

Overall, the Regulations are the first administrative regulations in the financial field issued after the Central Financial Work Conference. They aim to comprehensively strengthen the supervision of payment institutions before, during and after the event, and throughout the entire chain and field, and make general provisions on the access, business rules, and regulatory responsibilities of payment institutions. As an important departmental regulation supporting the Regulations, the Implementation Rules further refine the relevant provisions to ensure that the Regulations can be implemented, operational, and enforceable, and promote the standardized and healthy development of the industry.

In combination with the actual actions of the industry, after the People's Bank of China solicited opinions on the "Regulations" in March 2021, some payment institutions have gradually moved closer to regulatory requirements in terms of name changes and equity structures. With the official implementation of the "Regulations" at the end of 2023, the pace of adjustment of payment institutions has accelerated, and many payment institutions have been approved to add the word "payment" to their company names.

Beijing Business Daily reporter Liao Meng