The Chinese government has ordered online payment groups to operate through a centralized clearing house by October 15, a move which is expected to impact the dominance of payment behemoths Ant Financial and Tencent by forcing them to share transaction data with competitors, according to East & Partners.
East & Partners says China is the world leader in mobile payments, with transaction volumes rising nearly fivefold last year to 59 trillion yuan (A$11.2 trillion).
Citing the Financial Times, East & Partners says The People’s Bank of China (PBOC) is mandating that all third-party payment companies channel payments through a new clearing house by June 2018.
Between the two, Ant Financial and Tencent’s WeChat Pay, they hold around 95 percent of all domestic payment transactions.
Hundreds of millions of Chinese consumers and businesses have linked their Alipay or WeChat Pay accounts to their commercial bank accounts, enabling third-party payments to be credited and debited seamlessly.
Currently, the third-party systems bypass the banks when recording payment information including the merchant’s name and location as the bank record shows Alipay or WeChat as the recipient. Those payment service providers maintain separate relationships with banks to facilitate payments to or from users’ bank accounts.
PBOC’s new rules will require all payment companies to connect to the clearing house by October 15 and to channel all payments through it by June 30, according to the document.
“We are actively participating in the preparation work and will complete the adjustment according to the requirements of central bank,” an Ant Financial spokesperson said.
The new clearing house will enable the central bank to monitor online payments directly without requesting data from processors, bolstering its to detect money laundering and other illegal transactions.