China’s central bank has ordered the establishment of nationwide clearing house for online payment services, instructing 44 financial firms to route their transactions through the new platform, according to a report by the South China Morning Post (SCMP).
New regulations introduced by the People’s Bank of China will require banks and online payment services, including the popular Alipay (part of the Alibaba’s holdings) and Tencent’s Tenpay services to connect to the new platform by October 15. The companies must then be ready to route transactions through the platform from June 30, 2018.
The China National Clearing Centre signed an agreement last month to establish the platform’s operating company; each of the 44 companies instructed to join the centralised clearing service will be entitled to a minority stake in the business.
“The current direct connection model bypasses the central bank’s clearing system, making it difficult for regulators to track and monitor the capital flow of those payments, leaving loopholes for money laundering and other irregularities,” said Wang Pengbo, an analyst at Beijing-based consultancy Analysys, speaking with the SCMP.
Transaction data from the clearing service will be available outside of third party providers for the first time, providing a useful repository for fintech players.