On May 19, 2010, the People’s Bank of China (“PBOC”) issued a new set of regulations for online payment service providers that will take effect on September 1, 2010. The new regulations bring payment services within the banking regulatory scheme.
Scope – The payment services include: (1) internet payment; (2) the issuance and acceptance of prepaid cards; (3) credit card acceptance; and (4) other forms of payment services recognized by the PBOC.
Competent Authority – The new regulations show that the PBOC authorities intend to regulate non-financial institutions which act as payment intermediaries.
License Required – To date, pre-paid cards and internet payment have been left largely unregulated in the PRC. The new regulations require any non-financial institution that offers such services to obtain a payment service business license (“PS”). The PS license will be issued by the competent local PBOC branch (i.e. the sub-provincial city center branch).
Prerequisites for a PS License– Application requirements include: (1) meeting minimum registered capital requirements (i.e. not less than 100 million RMB for companies providing payment services nationally; not less than 30 million RMB in autonomous regions); (2) being profitable and providing e-commerce information technology service for at least two years; (3) having more than five senior employees familiar with payment services business; (4) meeting payment services business facility requirements; and (5) having sound organizational structure, internal control systems and risk management measures.
PS License Application Documents – Requisite application documentation include: (1) written application detailing plans for payment services; (2) business license; (3) articles of association; (4) capital verification certificate; (5) audited financial statements; (6) business payment feasibility study report; (7) anti-money laundering verification; and (8) technical safety testing and certification.
Possible Sanctions– Failure to comply with the new PBOC regulations may result in revocation of the PS license and/or fines. Furthermore, any illicit criminal activities (i.e. money-laundering or fraud) will be reported to the relevant authorities for further action.
Practical Implications – The new regulations will potentially impact retailers in two ways. Firstly, retailers using prepaid cards (i.e. store cards, gift cards, value-added cards, etc.) will need to ensure that the card issuers have obtained a PS license. Secondly, retailers with an online presence will need to ensure that third party vendors meet the necessary requirements and hold a valid PS license under the new regulation.