Foreign-invested payment organizations are allowed to provide electronic payment service in China

On March 19, 2018, People’s Bank of China published the Announcement on Matters Relating to Foreign-funded Payment Organizations [2018] No.7 (“Announcement”) to open up China’s domestic and cross-border electronic payment service market to foreign-funded payment organizations. The Announcement sets out market access requirements and a regulatory framework for foreign-funded companies to conduct payment business in China. Although the requirements are substantial, the Announcement does open another door for foreign investment.

According the Announcement, foreign-funded enterprises are required to set up a Chinese legal entity, to obtain a Payment Business License, to possess required payment business facilities in China and to carry out personal and financial information processing in China. Besides this, foreign-funded enterprises shall comply with the same regulatory framework as Chinese non-bank payment organizations in terms of corporate operation, risk management, fund processing and deposit of provisions, etc.

Payment services by non-financial institutions in China include three types of services: online payment, prepaid card issuance and acceptance, and bank card acceptance. Online payment covers money transfer by internet, mobile phone, direct-line telephone, digital television payment, etc. The Payment Business License is necessary for all three services. The qualification requirements and application procedures for Payment Business License are provided in Administrative Measures of People's Bank of China on Payment Services Provided by Non-financial Institutions (2010). To receive a payment business license on a national scale, the minimum registered capital is RMB 100 million, and the major contributor must have provided information processing support services for financial institutions or e-commerce activities for more than two years consecutively, among other requirements.

Currently, there are 243 valid Payment Business Licenses covering all three type services issued by People’s Bank of China, only two foreign-funded companies obtained Payment Business License for the prepaid card service.

Although it is still unclear how this new policy would be implemented in practice and further inquiries with the competent authorities would be needed, it is definitely a signal that the Chinese government now welcomes foreign investment in the payment service market (even though it should fall under the Chinese payment service regulation regime).