Regulatory changes issued by the People’s Bank of China (Central Bank of China) are set to alter the Chinese online payment ecosystem forever. Top-tier digital payment services such as WeChat Pay and Alipay are expected to transfer all relevant transaction data to appropriate agencies starting June 30th, 2018.
Beginning June 30th, 2018, payment agencies such as WeChat Pay and Alipay will be asked to use Wanglian (Non-Bank Internet Payment Union). The People’s Bank of China stated businesses should begin migrating to Wanglian as soon as October 15th, 2017. The institution has managed to sign 45 firms (nonbank) such as Tencent Holdings Ltd And Alibaba Group Holding Ltd. The Central Bank of China plans to offer a robust, top-tier risk assessment system to aid online financial businesses with an all-in-one payment-clearing platform.
How will this shape the future of virtual commerce for businesses?
To understand these regulatory changes, it’s important to recognize what the previous system entailed. Under earlier regulations, online payments between banks in China could involve direct contact with third-party payment companies. Therefore, users were able to transfer funds between Alipay/WeChat Pay and their bank account without restrictions.
Current changes will put an end to this. The central bank has issued a detailed clearing system to accumulate transaction data from third-party payment companies.
Why is the Central Bank of China doing this?
The Central bank of China seeks to control all payment channels and relevant data in the hopes of avoiding stolen funds, cashing out problems, and money laundering. If it collects information from third-party payment companies, the bank can intervene on time and help restrict deviant behavior. If necessary, the Central Bank of China can use Wanglian and block access to illegal funds immediately. This was impossible in the past since third-party payment companies chose to retain all relevant information.
Wanglian is poised to help monitor, control, and enhance the third-party payment market. It will act as a real-time tool to establish transparency. In the past, third-party payment companies found it necessary to manage user funds in-house. With the Wanglian, these companies will see a reduction in expenses and a rise in security.
The online payment market was valued at a massive $3 trillion and counting for China in 2016. The Central Bank of China realized discrepancies in online funds and how deviants were relying on nefarious payment mechanisms. These changes are aimed to gain control over those misdemeanors and establish a safer financial setup for all users.
What about the user’s perspective?
The user will not see a noticeable difference in his/her transaction(s). All third-party payment services will retain the system setup as before the regulatory change. It’s the work in-house that will change such as the payment data being relayed to Wanglian compared to local banks. This should aid users as it will beef up security and ensure the safety of their hard-earned funds.
Third-party payment services will rush to organize for the formation of Wanglian as October 15th, 2017 rolls around.