|Girish Shetti |||Aug 14, 2016 04:33 PM EDT|
(Photo : Getty Images.) China's central bank has decided to stop issuing licenses to new non-bank payment agencies.
China's central bank said on Friday that it would stop issuing licenses to new non-bank payment agencies as regulators seek to efficiently regulate the fast-expanding non-banking payment industry, China Daily reported.
"No new institutions will be approved for a certain period, in principle," the People's Bank of China (PBOC) said. However, the central bank agreed to extend business licenses of 27 third-party payment agencies that are already operating in the market.
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These agencies, including market leader Alipay, will have their licenses extended for another five years. Most of these non-bank payment companies were issued licenses in 2011.
However, some of these firms will be forced to narrow their service due to serious regulatory violations and sluggish business, the PBOC said.
To better regulate the sector, the central bank warned that it would penalize firms that are found to be guilty of following illegal practices and cancel licenses of agencies that fail to offer payment services for a long time.
China's non-bank payment sector has grown impressively since the launch of Alipay, a firm backed by Chinese e-commerce juggernaut Alibaba Group. Presently, about 270 agencies own non-banking payment licenses in China. However, apart from Alipay and Tencent's Tenpay, most of the firms have struggled to gain a solid foothold in the non-banking payment sector.
Over the years, the industry has witnessed several fraud cases that have highlighted the financial risk involved in the sector. The strings of fraud cases prompted the central bank to unveil a new rule aimed at stopping third-party agencies from accepting huge deposits from borrowers.
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