context: In line with our expectations, regulators have picked up on the clean-up order issued to Ant Finance, releasing one of the most comprehensive regulatory documents for the payment industry to date. Further clarification is offered as to what constitutes market dominance and the regulatory orders that could follow, potentially setting a precedent for other industries.

Public comment is now open for ‘Regulations on non-bank payment institutions’ until 19 Feb 2021, drafted by PBoC (People’s Bank of China), the central bank, to

  • strengthen the supervision and management of non-bank institutions
  • regulate the operation of non-bank payment institutions
  • strengthen anti-monopoly in the payment finance industry

The regulations stipulate

  • licensing, establishment, changes in operations, and termination of business
  • payment institutions must not engage in credit granting activities
  • classifying payment business into
    • deposit account business
    • payment transaction processing business
  • payment business operation rules
    • regulatory requirements based on risk levels
    • cross-institution payment services shall be processed by clearing institutions
    • payment institutions must deposit reserves in PBoC or a commercial bank that meets requirements
  • strengthening anti-monopoly in the industry
    • maintaining a fair competitive market order
    • situations that may trigger an early warning
      • an institution’s share in the market reaches one third
      • the total market share of two institutions reaches one-half
      • the total market share of three institutions reaches three-fifths
    • situations that may trigger an investigation of market dominance
      • an institution’s market share reaches 50 percent
      • the total market share of two institutions reaches two-thirds
      • the total market share of three institutions reaches three-quarters
    • PBoC may recommend measures to State Council’s anti-monopoly law enforcement agency to
      • stop the abuse of market dominance
      • stop the concentration of undertakings
      • split institutions according to the type of payment business
    • building a marketised exit mechanism
  • guiding payment institutions to
    • return to main business
    • pay more attention to product innovation and meeting user needs

Clearly, the release is a ‘concrete manifestation’ of the spirit of strengthening anti-monopoly and of preventing the disorderly expansion of capital of the Central Economic Work Conference for 2021, believes Dong Ximiao 董希淼 Merchants Union Consumer Finance chief researcher.