As per a notice released by PBOC, all “internet payment business” of “Non-bank payment processor” must be conducted via the “Wanglian(Web-Union) Payment Platform”. It’s a head-on blow to the Unionpay’s vision in the third-party payment business. It also means all internet payment data will be controlled by one authority. Regulation on internet payment in China will be further centralized. Bitcoin may become more popular due to the censor-resistant and decentralization feature.

As disclosed by public Wechat account(caijingtaolue), PBOC has ordered all online payment

Below are the screenshots of the document:

Two deadlines are set in the document:

1. All online payment business that is related to bank accounts will be processed via WebUnion Platform starting from 30 June, 2018.

2. Integration with the WebUnion Platform and business migration work should be completed by 15 October, 2017.

China UnionPay has been eying on the online payment business for a long time. The organization has been promoting QR code payment to win some market share from the domestic giants of Alipay, TencentPay etc.

China UnionPay is an association for China’s banking card industry, operating under the approval of the People’s Bank of China (PBOC, central bank of China). It is also the only interbank network in China that links all the ATMs of all banks throughout the country. –Wikipedia

Now that third-party payment will be handled by the newly-established WebUnion Settlement Company, the UnionPay may lose market share in terms of online payment. Meanwhile, the settlement business related to bank accounts is also facing competitors from abroad like Visa, Mastercard, American Express etc.

Secondly, the order also constitutes the ceiling of future growth of third-party payment processor. Alipay and TencentPay, the top players of online payment market in China, may just have to reconcile with the regulations.

Thirdly, the centralized “Webunion Payment” will allow PBOC to have greater control over online payment transaction.

Suppose John wants to deposit 100 CNY to Mary. John’s money is bank A and Mary’s account is in Bank B. Therefore a cross-bank transaction needs to be conducted. Traditionally, such transaction will be processed through the settlement system of the Unionpay. But after the emergence of third-party payment processor, the flow is changed. For example, if similar transaction is conducted via Alipay system, John’s 100 CNY will be withdrawn to Alipay’s account in Bank A and his Alipay account is credited accordingly. Then John applies to deposit 100 CNY to Mary’s account in Bank B. Then Alipay will deposit 100 CNY to Mary’s account in Bank B via Alipay’s account in Bank B and John’s balance in Alipay account is deducted accordingly.

In the latter case, only Alipay has access to the detail of the transaction. Neither the bank nor the regulator can verify the transaction. This is what concerns them most: the loss of control.

The WebUnion Platform is another intermediary institution that is enforced by PBOC to the third-party processor, purpose of which is to strengthen regulation.

Fourthly, PBOC may obtain more financial data through the WebUnion.

The regulation will have little impact on the ordinary people, except for those who need to launder their money.

In short, the central authority is to strengthen the monitoring of personal bank accounts. Bitcoin may be used an alternative due to its dis-intermediation, censorship-resistant and decentralization feature.