China establishes clearing house for mobile payments companies like WeChat Pay and Alipay
The China National Clearing Centre, the Chinese central bank’s settlements and clearing division, has signed an agreement ordering all mobile payment companies such as WeChat Pay and Alipay to channel mobile payments through a new clearing house by next June, a move that is expected to have a significant impact on the dominance of WeChat Pay and Alipay.
China is the current world leader in terms of mobile payments, with transaction volumes more than doubling in Q1 2017 according to iResearch Global
. Online payment services are ubiquitous in China and users are able to simply download the WeChat payment app or Alipay to pay for dining
, supermarkets and even street vendors. Since the emergence of WeChat Pay and Alipay, hundreds of millions of Chinese consumers have linked their commercial bank accounts to their smartphones enabling third party payments to be credited and debited seamlessly.
The current system between mobile payment companies and banks bypasses the central bank under what is termed the ‘direct connection’ model
. With this new clearing house, the People’s Bank of China (PBOC) would become the intermediary for the clearance of all transactions. The PBOC has required all payment companies to connect to this clearing house by October 15 and to channel all payments through it by June 2018.
According to Mr Wang Pengbo, an analyst at Beijing based consultancy Analysys, a unified nationwide platform and regulations would lead to safer online payment for consumers. In particular, he pointed out how some third party payment companies have used their licenses to create channels for illegal payments
. However, others believe that this is a one-sided loss for payment institutions. Mr Zhang Yi, a Fintech analyst at iResearch, believes that online payment data, once proprietary information for mobile companies such as WeChat Pay, will now be shared with other partners
. This serves a dual purpose – firstly, to help commercial banks obtain customer data and secondly, to prevent Alipay and Tencent from obtaining excessive market power.
The clearing house is the latest in a series of new rules to help regulators tighten supervision and increase oversight over the booming mobile payments industry. For WeChat Pay and Alipay, staying compliant with the legal rules set in place, while at the same time pursuing overseas expansion plans, is set to become a top priority.
About FOMO Pay Pte. Ltd
FOMO Pay is an authorized partner of WeChat Pay
, Alipay, UnionPay, Baidu Wallet & BestPay in Southeast Asia, and was selected as one of the Top 100 Asian Companies by E27, Top 100 Startups by Red Herring Asia, and Top 8 by DBS’ FinTech Accelerator Program, Top Fintech Startups in Singapore by Fintech Asia. FOMO Pay provides a one-stop solution for local merchants by facilitating payment collection from China market, including Chinese tourists. This comprises of online payment and in-store payment modes. FOMO Pay’s business solution serves clients from a wide range of industries, including the telecom, publishing, tourism and hospitality, F&B, education and retail industries.