The Quiet Change Happening to Chinese Mobile Payment Services — Creation of Online Payment Clearing House (网银)
While most people in the US are just starting to understand Chinese mobile payment services like Alipay and WeChat Pay and its ecosystems via word of mouth from friends who traveled to China, occasionally from subtle mentioning in articles like this in the likes of USA Today. But you rarely see in depth analysis pieces like this from the New York Times when talking about the Alibaba (Alipay) and Tencent (WeChat Pay) services.
Though most outside of China just starting to grasp the concept, using one of these Mobile Payment Services (MPS) is a fact of life for the 1+ billion people living in China. And it seems like now the Chinese Central Bank wants in on a piece of that, by creating an Online Payment Clearing House (网联 in Chinese) in the name of tracking and monitoring the capital flow for safer payment online.
There are still very limited English coverage on this as of August 7th, 2017, with the exception by the Alibaba owned, Hong Kong based South China Morning Post, but it has garnered a lot of coverage from different Chinese websites. The Online Payment Clearing House will look a lot like the internet version of UnionPay’s clearing service for bank-to-bank transactions, targeting transactions involving MPS and banks. Below is what it looks like with the change:
So why is this worth writing about? Online Payment Clearing House is going to be a company.
From this image circulating on Weibo (China’s hybrid of sites Facebook and Twitter), 45 institutions would be the shareholders of this company, and they break down in a very interesting way:
- Biggest shareholder at 12% is China’s Central Bank investing ¥120M RMB
- #2 on the list at 10% is 梧桐树投资平台有限责任公司 for ¥100M RMB, which is the investment vehicle of China’s State Administration of Foreign Exchange.
- #3–5 are in order Tencent, Alibaba, and JD.
- #6–10 are from Chinese Central Bank system
Just on the list of the top 10 investors at face value (not including minority holdings) the Chinese government has 37% of the control.
Creating the Online Payment Clearing House also enables the Chinese government access to the large amount of data that will be made available by the aggregation.
However, for the two dominate MPS providers — Alibaba’s AliPay taking 54% of the market, while Tencent’s WeChat Pay has 40%, this creates the ceiling for their mega finance ambitions. Marking them the biggest losers.
Does this mean other internationally accepted financial services companies like Visa/Mastercard can now make a play for the once dominated field? I guess time will tell.
One thing is very clear to me though is that the Chinese government governs in a specific way. You may be the darling today, but that could change overnight. The only thing constant is change.
