On payments: a delayed decision to renew payment license
Updates from 8/12/2016: Based on regulations of payments provided by non-financial institutions, the PBOC delivered its decision on whether to renew the licenses for 27 third-party payment institutions. The licenses were first issued 5 years ago, and there have been 270 institutions that have obtained the license, three of which had had their licenses revoked due to irregularities.
A long-waited decision: the decision on whether to renew the license was supposed publish at the end of May, 2016. However, it didn’t come until August. According to the answer given by the PBOC at the press conference, this is to increase synergy and compliance of the industry while to avoid the industry’s over-analyzing of the decision. The guidelines identified 2 situations where licenses are unlikely to be renewed (1) poor risk management and weak compliance (2) poor management or lack of a clear goal on payment business development/implementation. The decision also authorized the expansion of some institution’s type of payment services. It is mostly because of (1) demands after mergers and acquisitions (2) special needs of institutions with strong business presence. Among other things, some institutions have been recently sanctioned/fined yet have their license renewed as well. The considerations outlined by the PBOC are (1) administrative penalties should be distinguished from license renewal (2) compliance takes time (3) large impact on the development of the industry should be avoided. The PBOC will continue its principle-based regulation and keep track of the actual use of the licenses issued, encourage M&A if there is synergy and prohibit speculation of licenses.