7 Jan 2016
Central Bank Regulates Online Payment Services
The Measures tie the functions and limits of payment accounts to the capability and service standards of payment institutions in providing services to prevent and minimise information leakage and financial loss due to the fraudulent use of customers' names and the unauthorised use of their accounts. Payment institutions are asked to work out customer data protection measures and risk control mechanisms and ensure that they themselves and their business clients do not possess any sensitive information about their customers, thus customer information leakage at the source.
Xie Zhong, director of the PBOC's payment and settlement department, answered questions of concern to the public, such as whether money transfer through WeChat's "red packet" (hongbao or lucky money) function and whether inter-institution transfer would still be allowed after the implementation of these Measures.
Sending "Red Packets" on WeChat
The Measures divide individual payment accounts into three classes, each with its own functions and limits
Class I accounts only require one external identity (ID) verification process and verification is simple and convenient. They may be used for consumption and funds transfer, but only have an aggregate payment limit of Rmb1,000. They are suitable for small, ad hoc payments, such as sending "red packets" via WeChat.
For Class II and Class III accounts, the payment institutions need to find out and verify the ID of their customers through different channels in order to better prevent the opening of fake-name or anonymous accounts. These accounts have a higher annual aggregate transaction limit to satisfy the needs of customers for online shopping. Class II accounts that have gone through three ID verification channels have an annual payment limit of Rmb100,000 for consumption and funds transfer. Class III accounts that have gone through five ID verification channels have an annual aggregate transaction limit of Rmb200,000, which may be used for the purchase of investment and wealth management products besides consumption and funds transfer. For ID verification purposes, an applicant may provide details of one bank card, mobile phone number, water and electricity bill, or proof of academic qualifications in addition to ID card. If these are not sufficient, one may provide details of a second bank card.
What merits attention is that for Class I accounts, the aggregate payment limit from the date of account opening shall be Rmb1,000. In other words, users that have sent "red packets" with an aggregate value of over Rmb1,000 will have to upgrade their status to Class II or Class III through external channels of ID verification before they can continue to send the “red packets”.
Apart from payment limits, a supervision mechanism by category will be established for payment institutions. Differentiated management based on the ratings of payment institutions will be exercised in aspects including supervision standards, efforts in supporting innovation and the allocation of supervision resources. Incentives for encouraging the pursuit of excellence and restrictive measures will be introduced to give full play to the positive guidance and promotion role of supervision by category in the management of payment institutions.
Payment institutions with higher overall ratings that have done a good job in implementing the real-name system will enjoy greater supervisory flexibility in aspects including private seller management, payment account transfers, payment account daily transaction limit, and bank card express payment verification.
For example, for payment institutions that are classified as Category A and have over 95% of Class II and Class III accounts registered with real name, the daily transaction limit will be raised from Rmb5,000 and Rmb1,000 respectively to Rmb10,000 and Rmb2,000 respectively. Institutions with higher overall ratings that have done well in real-name registration are allowed to expand the funds transfer function of their payment accounts. Customers may transfer the balance of their payment accounts to the bank accounts of other people. Other people may also use their bank cards to make funds transfer to the payment accounts of these customers. In this way, funds transfers between payment accounts, between bank accounts and between payment and bank accounts to other customers may be processed in a customary manner through payment institutions.
For explanations given by the PBOC for the Measures in Chinese, please see: