ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter

China's new monopoly rules target fintech giants

Alipay, WeChat Pay and other nonbank payment providers could face probes

Alipay dominated the third-party mobile payment market in 2020 but may have hit a wall due to proposed regulations that could limit its reach.   © Reuters

China's biggest third-party payment providers, Alipay and WeChat Pay, could face antitrust investigations and forced divestiture under proposed rules that tighten oversight of nonbank institutions in the sector.

The government and regulators will gain new powers to fight monopolies and abuse of market power by dominant players if draft rules published on Wednesday by the People's Bank of China governing nonbank payment providers are approved. The draft is open for public feedback until Feb. 19.

The rules are designed to "diversify regulatory measures with a focus on strengthening financial regulation and preventing systemic financial risks," the central bank said in a statement accompanying the draft. They also "strengthen anti-monopoly measures in the payments field, clearly define the scope of the market and the standards for determining market dominance, and maintain fair competition and market order."

The proposed regulations are the latest step in the government's campaign to defuse financial risks and crack down on anti-competitive practices by powerful fintech and internet giants. The campaign intensified in the fourth quarter of 2020, when authorities ordered the suspension Ant Group's massive IPO. Since then, regulators have let it be known that officials from Ant Group, which owns Alipay, have been summoned twice to discuss fair competition and consumer protection.

In December, the State Administration for Market Regulation, whose mandate includes antitrust, said it was investigating Alibaba Group for monopolistic practices that included forcing merchants to work with it exclusively. Ant and Alibaba were founded by Jack Ma, the internet billionaire who surfaced this week after a three-month public disappearance that sparked speculation he had fallen afoul of the law.

The antitrust regulatory storm has gathered momentum since the annual Central Economic Work Conference in December listed "curbing market monopolies and preventing the disorderly expansion of capital" as one of the government's eight priorities for 2021. In a Dec. 27 statement on the PBOC website, Deputy Gov. Pan Gongsheng said regulators will firmly break monopolies and promote fair competition in the fintech industry and will ensure that all financial activities are supervised in accordance with the law.

"The new regulation will strengthen the corporate governance of nonbank payment institutions by setting requirements on the qualifications and behaviors of their shareholders," David Yin, vice president at Moody's Financial Institution Group, said in a statement. "In addition, it could enhance fair competition in China's payment sector as the rules suggest that relevant government authorities can take antitrust actions on nonbank payment institutions if these institutions abuse their dominant positions."

The draft covers a broad spectrum of activity involving nonbank, third-party payment providers, including compliance with money laundering and terrorism financing regulations. It also codifies a requirement already in effect that funds in user accounts held by payment providers must be deposited in accounts managed by the central bank or qualified commercial banks.

But the biggest focus is on competition and monopoly behavior. For the first time, the PBOC provides a definition of what constitutes a monopoly for third-party payment companies. To wit: Any nonbank payment provider with a market share of 50% in electronic payments, including online and mobile banking payments; institutions that hold a combined two-thirds of market share; or institutions that account for 75% of the market.

The draft doesn't make clear how the regulator will calculate market share, whether by number of transactions or value.

Any of these providers could be subject to an investigation by the State Council's antitrust enforcement agency, according to the draft, which did not name the agency. If an investigation confirms a monopoly, the PBOC can then recommend a range of corrective actions, ranging from a suspension of a particular service to the breakup of an institution "by business type," the draft says.

The PBOC also lists criteria that would trigger a "regulatory interview," including a provider with a market share of one-third or two providers with a combined share of 50%.

Since 2011, the central bank has issued more than 230 licenses to third-party payment providers, which process payments mostly from online shopping for goods and services. But Alipay and WeChat Pay are the dominant players in mobile and online payments.

Alipay had 55.39% of the third-party mobile payment market as of the second quarter of 2020, while WeChat Pay, which is owned by Tencent, held a 38.47% share, according to data from research company Analysys.

Other tech companies -- such as food delivery service Meituan Dianping, ride-hailing company Didi Chuxing, e-commerce platform and smartphone maker Xiaomi -- are among rivals that have tried to make a dent in the sector, but they have negligible market shares.

State-owned China UnionPay -- the country's largest payment and settlement organization, which dominates the bankcard market -- has been trying to break into mobile payments with its QuickPass service since its launch in 2017, but it is still a small player.


Read also the original story. is the English-language online news portal of Chinese financial and business news media group Caixin. Nikkei recently agreed with the company to exchange articles in English.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more