September 1, the deadline for non-bank payment service providers in China to obtain a license to continue operating, is quickly approaching. China Daily, the largest English paper in China, provides an update on the latest developments and responses from the industry.
A total of 27 Chinese third-party payment companies received their licenses on May 26, including Alipay, the affiliated third-party online payment platform for the e-commerce giant Alibaba Group, and Unionpay Merchant Services Co, an affiliated payment institution of China UnionPay Co Ltd. But 131 companies are still awaiting approval from the central bank.
Even for some amongst the first round of licensees, there has been some confusion and disruption to business operations.
Shanghai-based SandPay E-commerce Service Co Ltd received its payment-business license in May. However, in July it announced on its official website that it had suspended all issuance of new cards.
“The license we have obtained specifies that we can only carry out payment business. With regard to card issuance, we are applying for another license. Therefore, we have suspended the issuing of new cards for the time being. But it is not known when we will offer new cards again,” said a source at SandPay who declined to give his name. “But consumers can rest assured that all our cards will function normally even after the central bank’s deadline. The bank has ruled that related companies will be disqualified from conducting payment business. But it has not said that consumers will be unable to use the cards after the specified date,” he said.
Though the official deadline is just a few days away, it is unlikely that the central bank will take immediate action against those who have yet to obtain a license. A grace period and some flexibility is almost certain given the wide-spreading effects this will have on the industry.
Even in the instance that some service providers might have to eventually shut down (this may not be a small number), the central bank will likely prefer a smooth process rather than a sudden death. This would create more issues than it would solve, especially when current cardholder protection is considered.