On 19 March 2018, the PBOC issued Announcement No. 7 (2018), with immediate effect.
The announcement extends national treatment to foreign-invested third-party electronic payment institutions, that is, it renders foreign-invested payment institutions subject to same market access standards and regulatory policies as purely domestic-invested payment institutions, by expanding the scope of application of the Measures for the Administration of Payment Services of Non-banking Institutions 2010 (2010 Payment Services Measures) to include foreign-invested payment institutions.
To provide third-party electronic payment services in China, qualified foreign investors must establish a foreign-invested payment institution and obtain a payment business operating licence in accordance with the 2010 Payment Services Measures.
In addition, the announcement requires foreign-invested payment institutions to:
- Have secure operating and disaster recovery systems that meet the requisite standards and can independently process payment transactions in China.
- Store, process and analyse in Chinese territory all personal information and financial data collected and generated in China. Where international transfers of such information are necessary to process cross-border transactions, the consent of the data subject must be obtained, the overseas data recipients must be required to perform equivalent confidentiality obligations, and the transfer must comply with applicable laws and regulations.
- Meet the requirements of the PBOC on non-banking payment institutions in relation to corporate governance, daily operation, risk management, fund processing, reserve deposit, contingency plans and so on.
Paul McKenzie, Partner, Morrison & Foerster, Beijing and Shanghai: “This market opening is potentially very significant for foreign companies in the electronic payment services sector, but it is too early to break out the champagne. In practice electronic payment licences have been difficult even for domestic companies to secure. Will the PBOC also open up the market to new domestic entrants?”
GC for foreign electronic payment services providers will want to closely study the announcement, as well as the 2010 Payment Services Measures, ensure the company understands the data localisation and other establishment and operational requirements, and coordinate with government relations personnel in approaching the regulators. Counsel may also wish to seek specialist advice in relation to licensing and compliance issues.