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Payment services
FinTechs belonging to this category offer alternative payment services which are supposed to provide a faster and cheaper way for national, European, and international payments for private and business customers by using new technologies.

For example, payment service providers hereby offer solutions to easily integrate several payment services in online shops.

Some FinTechs furthermore provide real cash register systems and online-reservation solutions for restaurants and shops providing their own payment services or making use of the payment services of FinTechs described above.


Attitude of the country towards modern payment services

In China, other than traditional payment services which are mainly provided by banks, modern payment services, such as WeChat Pay or Ali Pay etc., have developed rapidly, and been deeply integrated into people’s life in the past decade. Not only do they cover the commercial sector such as restaurants, stores, and entertainment venues, but also include non-profit institutions and facilities such as buses, subways, and medical hospitals etc., and have been available in China and abroad. The PRC government has been supporting the development of modern payment services continuously. However, since the payment service is a kind of finance service, the strict entry thresholds and regulatory system are also imposed on the payment service providers. The modern payment service providers must have a special license to be engaged in such service and shall comply with the detailed and comprehensive regulatory requirements continuously.

Legal affairs

Obligations and requirements to provide payment services or ancillary services described above

In general, the payment service providers can be either financial institutions or non-financial institutions, provided that such service providers satisfy the relevant requirements and hold the proper payment service license. With respect to the payment service in FinTech, non-financial institutions which hold payment service license take the key roles in this area. 

First of all, any entity engaged in the payment service activity shall obtain a payment license issued by the People’s Bank of China (PBOC). Depending on the scope of payment services to be engaged, PBOC has set different requirements for the minimum registered capital of the license’s applicants. For engagement nationwide, the minimum registered capital is RMB100 million (equivalent to approximately USD15.7 million or EUR14.2 million ), while for engagement within a province (autonomous region or municipality directly under the Central Government) is RMB30 million (equivalent to approximately USD4.72 million or EUR4.26 million). After obtaining the payment license, the payment institution should keep a good operating record. In case of: (i) the accumulated losses exceeding 50% of its paid-up capital; (ii) series operation risk; and (iii) series violation of laws and regulations, PBOC may suspend/stop the business operation of the payment institution. 

The government encourages foreign institutions to participate in the development and competition of China's payment service market. In 2019, PayPal has acquired a Chinese payment institution and became the first and currently only 100 % foreign-owned payment institution in China.

Secondly, as FinTech relies heavily on the Internet to provide services/information/content, an ICP (Internet Content Provider) license issued by telecommunication authority is required. Please note that most of the ICP license are subject to the foreign investment restriction – i.e. the foreign shareholding ratio of the applicants shall be no more than 50% and shall satisfy other requirements (such as experience in telecommunication service area etc.). <
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Thirdly, to carry out the cross-border foreign exchange payment business for e-commerce, the payment institution shall obtain permission from the Foreign Exchange Bureau.

Lastly, the payment institution shall also continuously comply with a series of laws and regulations, including but not limited to in the area of protection of customer information, anti-money laundering, face recognition etc. 

Additional comments regarding the legal situation for payment services or what FinTech’s must be aware of in this business area

From May 2011 to March 2015, PBOC issued a total of 271 payment licenses and the payment service industry developed rapidly. However, it is worth noting that, after 2015, PBOC takes a more conservative position on issuing the licenses and continues reviewing the qualifications of existing license holders. Some existing licenses were revoked in the past few years because the service providers cannot satisfy the requirements anymore. In 2022, the total amount of payment service providers has shrunk to 224. Since 2015, although no explicit regulation prohibits issuance of new license, from the perspective of regulatory, PBOC has not issued any new online payment licenses yet. It seems that PBOC intends to control the total amount of the licenses and strengthen the risk controlling of the existing license holders. Therefore, if a new player would like to be engaged in online payment service business, it may have to consider acquiring the shares of the existing license holders, rather than applying for a new license.

Economic conditions

Market size for payment services and biggest payment service providers

The market for payment services in China is huge, especially the online payment market. As of June 2021, the number of online payment users in China reached 872 million, with an increase of 17.87 million compared with the number in December 2020, accounting for 86.3% of the total internet users in China.  From the perspective of the transaction amount, for the third quarter of 2021 alone, the non-bank payment institutions processed 268.186 billion online payment transactions, with an amount of RMB90.71 trillion (equivalent to approximately USD14.29 trillion or EUR12.88 trillion).  

Alipay and WeChat Pay, relying on the online shopping platform and the social App, are the key providers of payment services in China.

Additional comments regarding the economic situation for payment services or what FinTech’s must be aware of in this business area

Currently, platforms led by Alipay and WeChat Pay have dominated the customer-end market, forming an oligopoly competition pattern, while the business-end market is still in fierce competition. Business-end market needs payment services that can efficiently connect institutions and merchants, as well as solutions that enable merchants to personalise their payments. Institutions such as UnionPay have certain advantage on the business-end, and Alipay and WeChat Pay are also developing the business in business-end market.

Moreover, the scale of cross-border payment transactions is expected to continue to expand, and the online cross-border payment service market could be further developed.



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