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FinTechs belonging to this area offer traditional banking services in a modern way, usually through online services or mobile applications as well as ancillary services – e.g. enabling customers to manage their giro- or custody-accounts online and in real time or offering e-wallet services. Keywords in this context are also API-Banking or Banking as a Service (BaaS)/ Bank as a Platform (BaaP).
API-Banking:
API stands for application programming interface and is offered to access data banks and to extract and insert information. API-Banking consequently means the access to data banks of banks to offer new and innovative banking applications.
Through these services FinTechs offer services with new functions, e.g. enabling customers to manage their accounts online and in real time.
BaaS – Bank as a Service/BaaP – Bank as a Platform:
The API-based Bank as a Service platform has a full banking licence, but merely serves as the back end for standalone independent FinTechs, which “use” the licence and the back end of the bank to offer new financial services, launch additional financial products or expand into additional markets.
Introduction
Attitude of the country towards online-banking services
With the great success of FinTechs like Alipay and WeChat, the use of online-banking services is quite popular in China. Governments are expressly encouraging banks to improve and upgrade online banking services based on developed internet technology. Many banks have launched an integrated online-banking service system covering all channels, including mobile banking, internet banking, telephone banking and WeChat banking. The services also cover transfer and remittance, account inquiry, life payment, investment and wealth management, network payment, credit card service as well as many other financial services. And since 2018, banks such as Shanghai Pudong Development Bank (SPDB), China Construction Bank (CCB), China Merchants Bank (CMB) and Ping An Bank (PAB) have launched API-Banking.
Legal affairs
Obligations and requirements to provide online-banking services described above
In China, the provision of online banking services is subject to the review and approval of the CBIRC. Therefore, the requirements for incorporation of a traditional bank are applicable to the online banking services provider. According to applicable laws, the minimum paid-in registered capital for a national commercial bank shall be RMB1 billion (equivalent to approximately USD157 million or EUR142 million), the minimum paid-in registered capital for an urban commercial bank shall be RMB100 million (equivalent to approximately USD15.7 million or EUR14.2 million) and the minimum paid-in registered capital for a rural commercial bank shall be RMB50 million (equivalent to approximately USD7.9 million or EUR7.1 million). At the end of 2021, the average deposit reserve ratio for banks was 8.4% .
Further, other than a banking license, if a bank intends to be engaged in online banking services as an internet service provider, it shall also obtain the ICP filing to conduct business on the Internet.
Additional comments regarding the legal situation for online-banking services or what FinTech’s must be aware of in this business area
In practice, online banking service providers shall also perform the obligations of anti-money laundering and anti-terrorism financing through building up internal policy system, applying relevant techniques and carrying out the KYC process, and shall report to PBOC when any suspicious transaction occurs timely. Failure in performing the obligations of anti-money laundering and anti-terrorism