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Thirdly, to carry out the cross-border foreign exchange payment business for e-commerce, the payment institution shall obtain permission from the Foreign Exchange Bureau.
Lastly, the payment institution shall also continuously comply with a series of laws and regulations, including but not limited to in the area of protection of customer information, anti-money laundering, face recognition etc.
Additional comments regarding the legal situation for payment services or what FinTech’s must be aware of in this business area
From May 2011 to March 2015, PBOC issued a total of 271 payment licenses and the payment service industry developed rapidly. However, it is worth noting that, after 2015, PBOC takes a more conservative position on issuing the licenses and continues reviewing the qualifications of existing license holders. Some existing licenses were revoked in the past few years because the service providers cannot satisfy the requirements anymore. In 2022, the total amount of payment service providers has shrunk to 224. Since 2015, although no explicit regulation prohibits issuance of new license, from the perspective of regulatory, PBOC has not issued any new online payment licenses yet. It seems that PBOC intends to control the total amount of the licenses and strengthen the risk controlling of the existing license holders. Therefore, if a new player would like to be engaged in online payment service business, it may have to consider acquiring the shares of the existing license holders, rather than applying for a new license.
Economic conditions
Market size for payment services and biggest payment service providers
The market for payment services in China is huge, especially the online payment market. As of June 2021, the number of online payment users in China reached 872 million, with an increase of 17.87 million compared with the number in December 2020, accounting for 86.3% of the total internet users in China. From the perspective of the transaction amount, for the third quarter of 2021 alone, the non-bank payment institutions processed 268.186 billion online payment transactions, with an amount of RMB90.71 trillion (equivalent to approximately USD14.29 trillion or EUR12.88 trillion).
Alipay and WeChat Pay, relying on the online shopping platform and the social App, are the key providers of payment services in China.
Additional comments regarding the economic situation for payment services or what FinTech’s must be aware of in this business area
Currently, platforms led by Alipay and WeChat Pay have dominated the customer-end market, forming an oligopoly competition pattern, while the business-end market is still in fierce competition. Business-end market needs payment services that can efficiently connect institutions and merchants, as well as solutions that enable merchants to personalise their payments. Institutions such as UnionPay have certain advantage on the business-end, and Alipay and WeChat Pay are also developing the business in business-end market.
Moreover, the scale of cross-border payment transactions is expected to continue to expand, and the online cross-border payment service market could be further developed.