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Financial – third-party payment of “payment + finance” inclusive finance is the future direction – Reapal

The third-partypayment agencies, which are represented by Alipay, have expanded to thefinancial field based on payment services through technical innovation andefficient and convenient advantages, leading a wave of internet finance, andmeanwhile forcing the traditional financial institutions to make changes.


However, the rapid development of third-party payment companies also results in regulatory concerns. On the one hand, standards and regulations are unavailable in part of the technical innovations, so there are some security risks; on the other hand, the rapid development of innovative business also arouses the controversy on breach of fair competition and regulatory arbitrage.

The insider comments that this is the most difficult time but also the most glorious moments for the third-party payment companies. As to the third-party payment industry recently under intensive supervision, where is the future?

Expansion from payments to finance field

The commercial banks have three core businesses, namely “deposit, loan and remittance”. The third-party payment agencies have covered the three traditional major banking businesses “payment, deposit and loan” as their thorough innovation, and armed their user accounts with functions similar to bank accounts.

For example, Alipay, as a third-party payment tool, has already realized the payment and transfer functions as traditional banks in the early. Meanwhile, Yu’E Bao, which is pushed out by Alipay in collaboration with Tianhong Fund based on Alipay’s huge customer base and precipitation working capitals, can bring about interests higher than that of current deposits, achieve T +0 redemption and also can also be used for shopping payment, which marks the initial transition of Alipay from “remittance” to “deposit”.

Since the launch of Yu’E Bao, its scale and the number of users expand rapidly. Currently, the number of users has broken through 81 million, and the capital scale has exceeded RMB500 billion, thus becoming a representative of the inclusive finance. Due to the demonstration effects by Yu’E Bao, Tenpay, Suning Yi Fu Bao, Jingdong Chinabank Payments, etc. have successively launched the products similar to Yu’E Bao.

And recently, the virtual credit card to be launched by Alipay and WeChat will realize the function of petty loans for consumption similar to that of traditional banks Alipay allows the users to “consume first, pay later.”

When the third-party payment agency acts not only as a settlement account, and is gradually equipped with functions similar to bank accounts, the regulatory concerns will naturally emerge.

At the China Development Forum last weekends, Wu Xiaoling, Vice Chairman of the Financial and Economic Committee of the NPC declared that, the most basic functions of commercial banks are deposit, loan and settlement, the combination of which will create a new currency. This is the most basic features of a commercial bank, thus the regulators shall closely monitor them. When the third-party payment agency handles settlement business while making loans by means of virtual credit card and supporting deposits on the payment system, i.e. they are armed with the three characteristics of the deposit, settlement and loan, which may require a research on impacts of them on money creation.

On the other hand, the bank accounts are strong real-name type while the third-party accounts are weak real-name type and its real-name system is not fully achieved. When it comes to the transfer of increasingly large funds and expanding boundaries, it will become another major problem as how to really guarantee the safety and meet the requirements of anti-money laundering.

Exactly based on consideration of these issues, the third-party payment companies recently suffered intensive supervisions, from virtual credit card and two-dimensional code payment being suspended to the consultative draft Internet Payment Operation Management Measures of the Payment Agency being issued.

Important driving force of inclusive finance

“Third-party payment companies are somewhat ‘fishing out of bounds’ during their barbaric growth and has already run off its initial positioning by the PBOC.”, one banker commented.

CICC pointed out that, the clauses under PBOC 2012 Internet Payment Operation Management Measures of the Payment Agency (consultative draft), such as “Internet payments are divided into bank account mode and payment account mode.” and “The payment institutions shall not be allowed to guide and encourage clients to deposit in the payment account in any form.”, have clearly indicated that PBOC encourages to use the bank accounts for large payments and has positioned the third-payment account on small and fast payments.

The latest issued and proposed Internet Payment Operation Management Measures of the Payment Agency (consultative draft) (hereinafter referred to as Consultative Draft) specifies that the single transaction limit transferred by the personal payment account shall not exceed RMB1000, and the yearly accrued amount of all payment accounts transferred by the same client may not exceed RMB10,000.

However, on March 24th, PBOC indicates that, the limit standards under the Consultative Draft are only initial opinions considering the amount of each internet payment through the payment institutions across recent years, as well as the anti-money laundering requirements. If the consumers believe that the account features and the specific amount are unreasonable, it shall be amended accordingly. In addition, the core of this measure does not lie in specific amount, but the controls of business and procedure risks.

There are arguments that the “fishing out of bounds” actions of the third-party payment companies are last resort. “Payment industry is very competitive, and we are on price. The rates have dropped repeatedly, and the third-party payment will be unable to survive if solely relying on a commission payment services.” an insider of third-party payment industry said to the First Financial Daily journalist. And the reasons for the expansion of a variety of financial value-added services by the payment agencies based on the payment services of recent years are consideration of meeting the user’s demands on one hand, as well as the last resort for surviving on the other hand.

YeePay CEO Tang Bin indicates to the First Financial Daily journalist that, the third-party payment itself is a very small profit industry and in this case it forces to combine the payment and finance, payment and marketing, thus expanding to a larger field. “The internet finance is a combination of payment and finance. Whether it is Yu’E Bao or just P2P trusteeship, the system of payment overlaying finance is adopted”.”

In addition, some insiders pointed out that the financial services expanded by the third-party payment make up for the shortage of banks to a certain extent, and has become an important driving force for inclusive finance. On March 24th, the five principles of internet finance supervision announced by PBOC has mentioned that, the internet payment of internet finance shall always adhere to the mission to serve for e-commerce development and provide small-amount, fast and convenient payments.

At the China Development Forum, the former president Ma Weihua of CMB former also argues that what the third-party payment is engaged in is the long-tail market, and the internet finance represented by the third-party payment industry makes up the fragmented and sporadic businesses that are neglected by the traditional banks and is complementary to traditional banks. But essence of the internet finance is finance, which requires protecting the public interests and preventing risks. Thus, to strengthen supervision is proposed to better support its development.