The Chinese Central Bank is tightening rules for eCommerce companies using third-party payment services to curb illegal transactions and boost innovation.
The move comes at a time when a growing number of third-party payment services are being reported to be absconding with customers’ money and are using loopholes to transact money illegally.
A recent Central bBnk report suggested that third-party payments companies have illegally processed hundreds of billions of yuan for online gambling companies based out of China. The report also supplied evidence on such companies exploiting the security gaps in Internet security walls, which have been designed to protect third-party payments companies.
In one such instance, the bank recently cracked down on Zhejiang Yi Shi Enterprise Management Services Co., which reportedly falsified financial records and stole from customers, according to Caixin Online. The third-party payments company became one of 270 others forced out of business by the Central Bank.
The sharp retribution, many critics believe, may in fact have a countereffect on financial innovation. However, the Central Bank’s bullish on the move, as it thinks the regulations would do more good than harm.
Central Bank Deputy Governor Fan Yifei told Caixin that the government’s pending rules for third-party payments services would, in fact, open new doors for further business growth in the future.
“We definitely hope that (third-party) payment institutions can grow in a healthy and sustainable manner,” he said in an interview with Caixin.
Instead of relying on third parties, the bank’s vision imagines the future of online payments to be in the Internet’s ability to process transactions involving bank accounts and eCommerce companies, he added.