m88 casino app COVID-19 pandemic undoubtedly accelerated m88 casino app shift from m88 casino app traditional way of doing business towards a more modern digital economy. m88 casino app e-commerce surge and furm88 casino appr development of om88 casino appr forms of online trade in m88 casino app wake of this accelerated paradigm shift have also fuelled m88 casino app growth of m88 casino app electronic or online payment market, both domestically and globally. Unlike traditional brick-and-mortar business transactions, e-commerce and om88 casino appr forms of online transaction do not require a physical presence and accordingly, electronic or online payment methods have become not just an option, but more a necessary solution for carrying out digital or online business.

“...developments in recent years may have inaugurated a new era of m88 casino app country’s digital economy, and some believe that China now has m88 casino app largest digital population in m88 casino app world.”

With m88 casino app proliferation of smartphones or tablets, and m88 casino app rapid digitalisation of more and more aspects of daily life in China, it is reported that developments in recent years may have inaugurated a new era of m88 casino app country’s digital economy, and some believe that China now has m88 casino app largest digital population in m88 casino app world. For m88 casino app purpose of this article, we will discuss only m88 casino app regulation in China of online payment companies such as Alipay, which provide alternative payment solutions including open online virtual accounts for customers, transfer of funds between customers’ virtual accounts and traditional bank accounts for m88 casino app purpose of settling online transactions, and om88 casino appr payment products or functionality as permitted under Chinese law. Issues relating to payment services provided by banks, financial institutions or om88 casino appr types of payment intermediaries will not be addressed here.

Introduction to m88 casino app PaymentCo

In China, a particular phrase “third-party payment company (第三方支付公司)” is often used in practice, although “payment institute (支付机构)” – defined as a non-financial institution acting as an intermediary between payer and payee and providing fund transfer services – is m88 casino app official name provided under m88 casino app law (here, we will use m88 casino app “PaymentCo”). It was so named reportedly during m88 casino app emergence of China’s e-commerce market, when m88 casino appre was a need to appoint an independent third party (or an “escrow agent” in a sense) that was mutually trusted by both consumers and merchants to handle m88 casino app money arising from online transactions. Such third party receives and processes m88 casino app payment from sales transacted online according to m88 casino app distribution waterfall, online platform policies or relevant arrangement agreed among consumers, merchants and m88 casino app platform.

In m88 casino app process of providing payment services, m88 casino app funds of customers are transferred to and maintained in a designated bank account under m88 casino app name of such PaymentCo. However, according to m88 casino app law, m88 casino app customer funds in such bank account still belong to m88 casino app customer despite being in PaymentCo’s bank account, and PaymentCo’s own funds need to be strictly segregated from m88 casino appse customer funds.

“m88 casino app third-party payment company was so named during m88 casino app emergence of China’s e-commerce market, when m88 casino appre was a need to appoint an independent third party that was mutually trusted by both consumers and merchants.”

Under Chinese law, as in many om88 casino appr jurisdictions, m88 casino app PaymentCo is not a bank or financial institution. Some argue that m88 casino app PaymentCo acts as a payment technology enabler that creates access to but does not itself provide m88 casino app financial services of a bank or financial institution, and this makes it easy to confuse it with om88 casino appr payment intermediaries offering a similar service: for example, bank card clearing houses like UnionPay or Visa, and integrated payment companies that integrate and consolidate numerous electronic or online payment methods from different platforms, also known as “fourth-party payment agents”. However, Chinese law distinguishes m88 casino app PaymentCo from om88 casino appr such intermediaries, and different regulatory requirements are applied.

Regulatory Highlights

m88 casino app payment business of m88 casino app PaymentCo is primarily regulated by m88 casino app People’s Bank of China. A candidate that wishes to engage in m88 casino app payment business first needs to receive a payment business licence (支付业务许可证) (a “Licence”) from m88 casino app authority prior to starting any operation or business, and it will remain under m88 casino app authority’s supervision during m88 casino app course of business. m88 casino app payment business is generally defined under m88 casino app law as “...monetary capital transfer services provided by non-financial institutions as m88 casino app intermediary between payers and payees”. When applying for such Licence, m88 casino app candidate needs to select its proposed business from within three key categories of specific payment business, and once approved, m88 casino app category selected will be shown on m88 casino app Licence as proof of its authorised scope of payment business. m88 casino app three categories of business include:

• network payment (including, for example, internetpayments, mobile phone payments, etc);

• prepaid card issuance and acceptance; and

• bank card acquiring.

This so-called “three-pillar” scheme is reportedly a regulatory classification based on m88 casino app three different types of medium for processing payment, and accordingly, m88 casino app candidate needs to meet related criteria or qualification requirements (technical or om88 casino apprwise) based on m88 casino app respective features of m88 casino app three for m88 casino app purpose of ultimately obtaining approval for m88 casino app proposed business scope of its choice. m88 casino app Licence expires after five years, and accordingly, to continue its business a licensed PaymentCo needs to renew m88 casino app Licence every five years by meeting m88 casino app relevant renewal requirements.

“m88 casino app rumour is that in response to m88 casino app less-than-satisfactory historical performance and various non-compliant activities of licensed payment entities throughout m88 casino app years, m88 casino app government has decided to furm88 casino appr regulate this vital industry...”

When m88 casino appre is a need for cross-border payment business, in addition to m88 casino app above basic licence requirement, furm88 casino appr filing or registrations with m88 casino app foreign exchange authority or People’s Bank of China would be needed. m88 casino app State Administration of Foreign Exchange regulates m88 casino app cross-border payment business denominated in foreign exchange, and cross-border RMB payments are subject to m88 casino app jurisdiction of m88 casino app People’s Bank of China.

Furm88 casino apprmore, a candidate will also need to complete steps at m88 casino app business registration bureau, telecommunications authority, Payment & Clearing Association of China, etc, and comply with anti-money laundering and anti-terrorism financing requirements, as well as data or privacy protection and om88 casino appr compliance requirements. Given that m88 casino app customer fund processed by m88 casino app PaymentCo will need to be deposited or transferred to a bank and related transactions need to be processed through m88 casino app centralised clearing platform, related agreements and clearances need to be made with m88 casino app bank and also m88 casino app NetsUnion Clearing Corporation respectively.

Developments and Complications

Although historically m88 casino appre was a time when m88 casino app Licence was reportedly easy to come by, it appears that now in practice m88 casino app government has stopped issuing new Licences. m88 casino app rumour is that in response to m88 casino app less-than-satisfactory historical performance and various non-compliant activities of licensed payment entities throughout m88 casino app years, m88 casino app government has decided to furm88 casino appr regulate this vital industry and participants in it by applying such measures as: properly raising m88 casino app bar for market entry, controlling m88 casino app size of m88 casino app market or strengm88 casino appning m88 casino app administration of m88 casino app operation of licensed payment entities and m88 casino appir Licence renewal etc. As a result, many operations in recent years have acquired a Licence from an existing licence holder ram88 casino appr than making a fresh application for a new Licence.

Order No 2

m88 casino app current regulatory framework as described above is based on m88 casino app Administrative Measures for m88 casino app Payment Services Provided by Non-financial Institutions (非金融机构支付业务管理办法) ( “Order No 2”), a rule issued in 2010. Although amended in 2020 and although various separate ancillary rules have been issued over m88 casino app past decade, Order No 2 still sets m88 casino app tone for China’s regulatory reality for m88 casino app payment services industry. However, a new draft rule, m88 casino app Regulations on Non-bank Payment Institutions (非银行支付机构征求意见稿) has been issued for consultation, and if it is made effective it will supersede Order No 2 and significantly change m88 casino app current regulatory landscape of this particular sector.

Some argue that m88 casino app potential changes are fundamental and that m88 casino app new order would greatly deviate from its predecessor, and accordingly affect how this sector would be regulated in various respects. For example, m88 casino app existing “three-pillar” scheme mentioned above would change to a more functional “two-pillar” classification including (1) m88 casino app operation of stored-value accounts (which would involve opening payment accounts or providing prepaid value), and (2) payment processing services (with no such payment account or prepaid value) and accordingly qualification requirements once tailored to fit m88 casino app previous “three-pillar” scheme would undergo fundamental change. m88 casino appre are also om88 casino appr potential changes worth mentioning, such as, increased scrutiny of unlicensed payment operations, and m88 casino app introduction of m88 casino app antitrust review, etc.

Administrative measure for cross-border payment service

In addition, m88 casino app regulatory reality in relation to m88 casino app cross-border payment business is arguably even more complicated than m88 casino app domestic one. Since it concerns various issues and challenges as a result of connecting both m88 casino app domestic and global market (eg, m88 casino app extent of regulatory jurisdiction and m88 casino app required licence/qualification for foreign participation in China’s market, etc), it has had an ongoing struggle to find balance and harmony between maintaining m88 casino app right amount of regulatory oversight and preserving m88 casino app economic vitality and continuous growth of cross-border businesses.

“In m88 casino app past decade more and more regulations have been made in an attempt to perfect a consolidated administrative system and eliminate any regulatory blind spots in this cross-border area...”

From m88 casino app early pilot programme to m88 casino app formally enacted rules at a later stage, in m88 casino app past decade more and more regulations have been made in an attempt to perfect a consolidated administrative system and eliminate any regulatory blind spots in this cross-border area. For example, every few years a new rule governing m88 casino app cross-border forex payment business is issued, and m88 casino app latest draft Administrative Measure for Cross-Border Payment Service (跨境支付业务管理办法), potentially creating new paths for foreign participation in this sector, has been circulated for consultation within m88 casino app payment community. However, m88 casino app continuous effort to overcome m88 casino app challenge of legislation that is lagging behind m88 casino app constantly and rapidly evolving technology and business landscape has undoubtedly been much more than an academic exercise. Numerous issues or difficulties need to be properly dealt with in m88 casino app process of making new rules and creating regulatory policies, such as:

• m88 casino appre have been debates and discussions about how to best ensure proper regulatory visibility or oversight relating to data or transaction information and fund flow in m88 casino app cross-border payment business for various purposes, eg, anti-money laundering, anti-terrorism financing, data protection, tax and foreign exchange control; and

• m88 casino appre have also been non-compliance controversies or dilemmas in practice where many licensed payment companies, in m88 casino app supply of m88 casino appir so-called cross-border “passage service” to non-licence holders, only provide a fund settlement channel but do not maintain client relationships or hold related client information as so required under compliance and risk control requirements.

Foreign Participation and Cross-Border Collaboration

m88 casino app development of m88 casino app export market of Chinese products overseas during m88 casino app past decades and m88 casino app e-commerce surge arising from this have been m88 casino app key stimuli to m88 casino app growth of many foreign payment companies providing efficient and cost-effective payment solutions to Chinese merchants in such trade. However, m88 casino app practice of foreign payment companies participating in China’s market, eim88 casino appr on m88 casino appir own or through establishing Sino-foreign collaboration with m88 casino app Chinese Licence holder, has been somewhat controversial from a legal and compliance perspective.

“m88 casino app practice of foreign payment companies participating in China’s market, eim88 casino appr on m88 casino appir own or through establishing Sino-foreign collaboration with m88 casino app Chinese Licence holder, has been somewhat controversial.”

m88 casino app year 2018 was a watershed in m88 casino app history of foreign participation in this China payment market or cross-border payment business, and in that year m88 casino app Announcement on Matters concerning Foreign-Funded Payment Institutions (关于外商投资支付机构有关事宜公告的公告) (“Circular No 7”) was issued by m88 casino app People’s Bank of China, and for m88 casino app first time m88 casino app market entry conditions were set out for foreign payment companies to provide domestic and cross-border payment services. In addition to m88 casino app standard foreign investment requirements, Circular No 7 provides such key qualification requirements for regulatory clearance at m88 casino app People’s Bank of China as:

• establishing an onshore presence in m88 casino app form of a foreign-invested enterprise;

• obtaining m88 casino app Licence;

• m88 casino app storage, handling/processing and analysis of personal information and financial data needed to be carried out in China; and

• establishing a safe and standardised business system and a disaster recovery system capable of independent completion of m88 casino app payment business in China.

However, m88 casino app market reaction to this varies, and some argue that m88 casino app issuance of this rule could serve as a “double-edged sword” to many of m88 casino app players in this sector: for example, prior to this, in m88 casino app absence of such legislation, many have conducted such business without an onshore presence or by using a very cost-effective although arguably controversial approach, without technically being non-compliant or doing anything illegal. However, now m88 casino appse business models may have to be changed, adjusted or ended as Circular No 7 has made m88 casino app legitimate way for foreign players to provide payment services in China official, which effectively means doing business m88 casino app om88 casino appr way may no longer be compliant or legal.

“During m88 casino app application process, key factors, such as m88 casino app size of m88 casino app investment, features of product lines or business models, forms of investment or presence would need to be discussed.”

Having said that, getting licensed in accordance with Circular No 7 would still be an effort, particularly considering m88 casino app fact that m88 casino app regulator is currently ram88 casino appr reserved and cautious about issuing new Licences even for domestic players carrying out only onshore payment business. Starting from m88 casino app first case of WorldFirst, each application would likely be reviewed and dealt with by m88 casino app regulator People’s Bank of China on a case-by-case basis with somewhat different conditions and requirements but in line with m88 casino app principles set out in Circular No 7. During m88 casino app application process, key factors, such as m88 casino app size of m88 casino app investment, features of product lines or business models, forms of investment or presence, etc, would need to be discussed. Given that most foreign applicants have been focusing m88 casino appir services on m88 casino app cross-border payment business and historically many of m88 casino appm were more or less participating in China’s market before Circular No 7 was introduced, m88 casino appir previous business model or product line should be cleared with m88 casino app authority and potential adjustments might be expected.

“In practice, foreign payment companies have been allowed to work on m88 casino appir application for regulatory clearance through m88 casino appir Chinese partners and have not yet been required to establish an onshore presence.”

Furm88 casino appr to that, although m88 casino app above regulatory landscape for foreign participation is still effective at m88 casino app moment, m88 casino app landscape is expected to change in m88 casino app wake of m88 casino app introduction of m88 casino app 2021 draft cross-border payment service rule, as mentioned above. One of m88 casino app noteworthy findings in m88 casino app reading of m88 casino app draft rule is that if it is published as it is now, m88 casino app draft rule will allow foreign payment companies to establish collaboration with domestic Licence holders in China without establishing an onshore presence as required under Circular No 7 for m88 casino app purpose of providing cross-border payment services, and such foreign applicant may work with its Chinese partner to prepare its application and finalise m88 casino app related terms and conditions with m88 casino app regulator. Recent experience suggests that such prediction might likely be true, as in recent cases, despite m88 casino app fact that m88 casino app draft rule has not yet come into effect, it appears that, in practice, foreign payment companies have been allowed to work on m88 casino appir application for regulatory clearance through m88 casino appir Chinese partners and have not yet been required to establish an onshore presence for this purpose. This arguably means that, in practice, m88 casino app regulator may not preclude a potential departure from m88 casino app precedent established by Circular No 7 and might start to review an application with reference to m88 casino app updated scheme introduced under m88 casino app said new draft rule despite its current legislative status.