China is planning to launch a national clearance system for third-party online payment service providers, in an effort to standardize and control risks in the flourishing Internet payment and financial services sector, according to Chinese media reports citing insiders.
The People's Bank of China is taking a leading role in establishing the system, and will acquire a stake in the platform to ensure control over the critical financial technology infrastructure.
The system, officially named "non-bank payment institutions online payment and clearance platform," has been in consideration for several months and is currently planned to go live in March next year.
An earlier blueprint of the platform had Alipay and Tenpay, two of the largest online payment service providers backed by Alibaba and Tencent, taking charge of the effort. That plan was scrapped due to strong rejections from other online payment players.
The current plan calls for all participating entities to contribute in terms of industry standards and guidelines. The platform will be able to have as many as 50 shareholders, with only the central bank and an industry association being allowed to hold a stake of over 10%.
"The system is completely transparent and standardized," said an insider quoted by Chinese media. "It's unfair to have any institution in the market place to conduct this task, as others will not have trust in it."
There are still many details to be determined, including the shareholder structure, fees, information privacy and profit sharing. The central bank will be the supervisor of the platform.
At the same time, a capital reserve system for third-party online payment providers will be implemented before year-end to strengthen risk control.
During the second quarter, the top ten third-party online payment providers in China were Alipay, Tenpay, China UnionPay Merchant Services, 99Bill, China Payment & Clearing Network, ChinaPnR, Yeepay, JDPay, Pay Passport and Baofoo, according to iResearch.
Alipay and Tencent were the two biggest providers, taking over 60% of the market share combined.