Author: Zhang Feng
The payment system, as a core component of modern financial infrastructure, is not only the blood vessel and bond of economic transactions but also directly relates to financial stability, social order, and the well-being of the people. China's payment regulatory system adheres to the core concept of "balancing development and regulation," gradually establishing a regulatory framework led by the People's Bank of China (hereinafter referred to as "the Central Bank"), with multi-departmental collaboration, comprehensive coverage, multi-layered, and three-dimensional regulation, covering five major areas: comprehensive regulation, account management, non-cash payment tools, payment systems, and payment institutions.
I. Comprehensive Regulation: Top-Level Design Leading the Standardized Development of the Payment Industry
Comprehensive regulation serves as the "general outline" of the payment regulatory system, clarifying regulatory direction and industry boundaries through institutional design, and constructing a governance pattern of "government regulation, industry self-discipline, corporate governance, and social supervision," laying the institutional foundation for the long-term healthy development of the payment industry.
(A) Multi-Layered Legal and Regulatory System: Strengthening Institutional Foundations
The legal and regulatory system in China's payment sector presents a typical pyramid structure. At the top are foundational laws such as the "People's Bank of China Law," "Anti-Money Laundering Law," and "E-Commerce Law," which establish the basic principles of payment activities, regulatory entities, and division of responsibilities. The "Regulations on the Supervision and Administration of Non-Bank Payment Institutions," which officially came into effect in 2023, is the first administrative regulation in the financial sector following the Central Financial Work Conference and is of milestone significance. This regulation clarifies the definition of non-bank payment institutions, entry thresholds, business norms, and exit mechanisms, marking a transition in payment industry regulation from "extensive" to a new phase of "refined" and "standardized" regulation.
At the level of departmental regulations and normative documents, the Central Bank has successively issued a series of documents such as the "Measures for the Administration of RMB Bank Settlement Accounts," "Measures for the Administration of Network Payment Business of Non-Bank Payment Institutions," and "Measures for the Administration of Bank Card Acquiring Business." These regulations detail the operational processes, technical standards, and risk control requirements for various payment businesses, forming a "regulatory closed loop" that covers the entire payment chain and all scenarios, ensuring that regulation has legal basis and procedural guidelines.
(B) Full Process Business License Management: Strictly Controlling Market Entry
A strict business licensing system is the core means of comprehensive regulation. For non-bank payment institutions, establishment must be approved by the Central Bank, obtaining a "Payment Business License," and meeting prudential conditions such as a registered capital of no less than 100 million RMB (and being paid-in capital), and that major shareholders and actual controllers have good credit and financial strength. Commercial banks engaging in payment business must comply with the business scope stipulated in the "Commercial Bank Law," and if involving special businesses such as cross-border payments, must also obtain special permission from the State Administration of Foreign Exchange and other departments.
In addition, significant changes in payment institutions, such as changes in business types, changes in major shareholders, and cross-provincial operations, must be approved in advance to ensure continuity, transparency, and effectiveness of regulation. Through full-process control of entry, changes, and exit, regulatory authorities can dynamically optimize market structure and prevent "sick entry" and risk diffusion.
(C) Diverse Business Forms and Systemic Risk Prevention
Currently, China's payment market has formed a pattern of coexistence of traditional bank payments, non-bank payment institution network payments, mobile payments, and cross-border payments. The regulatory focus has also shifted from institutional regulation to functional and behavioral regulation, placing greater emphasis on preventing systemic risks and common industry risks.
The Central Bank has established a risk monitoring and early warning system for the payment market and continuously carries out special governance actions. For example, in response to illegal activities such as telecom network fraud, regulatory collaboration with public security and other departments has deeply carried out "fund chain" governance. Data shows that in 2023, the Central Bank assisted public security agencies in urgently intercepting fraudulent funds amounting to 328.8 billion RMB, establishing an integrated anti-fraud defense line of "early warning, interception, tracing, and crackdown." At the same time, by promoting the smooth exit of 71 non-compliant or poorly managed payment institutions from the market, the industry ecology has been effectively purified, preventing localized risks from evolving into systemic risks.
II. Account Management Regulation: Strengthening the First Line of Defense for Fund Security
Accounts are the starting point and destination of fund circulation, and account management is the cornerstone of payment security. China's account regulation closely revolves around the "real-name system," implementing full lifecycle management of account opening, usage, changes, and cancellations, focusing on curbing the use of accounts for money laundering, fraud, illegal fundraising, and other criminal activities.
(A) Regulatory Framework: Establishing Rigid Constraints on Account Management
The "Measures for the Administration of RMB Bank Settlement Accounts," "Regulations on Real-Name System for Personal Deposit Accounts," and "Regulations on the Supervision and Administration of Non-Bank Payment Institutions" constitute the core regulatory framework for account management. These regulations clearly require banks and payment institutions to fulfill customer identity verification (KYC) obligations, ensuring the real-name system for accounts is effectively implemented.
For example, enterprises are generally allowed to open only one basic deposit account, curbing the phenomenon of multiple and irregular account openings at the source; personal payment accounts are classified based on the strength of identity verification (Type I, II, III accounts) and set corresponding balance payment limits, balancing convenience and security.
(B) Business Processes: Strengthening Review and Supervision at Each Stage
In the account opening stage, institutions must verify personal identities using network verification systems, and for corporate clients, they must review business licenses and other documents, taking enhanced measures such as face-to-face interviews and on-site visits in cases of anomalies. In the usage stage, regulators require enhanced review for large transfers between public and private accounts (e.g., single transfers exceeding 50,000 RMB from units to individuals); payment institutions must use secure authentication tools and are strictly prohibited from storing sensitive user information in violation of regulations. In the account closure stage, institutions are required to promptly process closures after confirming there are no outstanding transactions and to impose restrictions on long-dormant accounts.
(C) Risk Prevention: Focusing on Key Areas and Anomalous Behaviors
Account regulation covers three main categories: corporate bank accounts, personal bank accounts, and payment accounts. The focus of prevention varies: corporate accounts emphasize preventing false account openings and misappropriation of funds; personal accounts strictly combat renting, lending, selling accounts, and opening accounts in someone else's name; payment accounts strengthen management of customer reserve funds, ensuring funds are securely deposited in dedicated accounts and not misappropriated.
In practice, regulatory authorities establish account risk monitoring models to intelligently identify and warn against anomalous patterns such as "one person with multiple accounts," "quick in and out" of accounts, and frequent transactions at night. The 24-hour transfer and revocation system for personal ATM transfers also provides the public with a valuable "cooling-off period" and remedy window to prevent telecom fraud.
III. Non-Cash Payment Tools Regulation: Upholding Safety Bottom Line Amidst Innovation Waves
The popularity of non-cash payment tools such as bank cards, QR codes, and mobile payment applications has greatly enhanced transaction efficiency and user experience. The regulatory goal is to guide tool innovation along compliant, safe, and beneficial paths, balancing innovation vitality with risk control.
(A) Dual-Driven by Regulatory Standards
The "Measures for the Administration of Bank Card Business," "Guidelines for Electronic Payments," and "Regulations on the Supervision and Administration of Non-Bank Payment Institutions" regulate from the perspective of business rules. At the same time, supporting technical standard systems, such as "QR Code Payment Security Specifications," financial IC card standards, and barcode payment interconnectivity technical solutions, provide technical benchmarks for the safety and interoperability of payment tools.
For example, regulations clearly require that electronic payment instructions must be verifiable and tamper-proof, and transaction records must be retained for at least five years; payment institutions providing services to domestic users must complete relevant transaction processing and data storage within the country to ensure data sovereignty and security.
(B) Inclusive and Prudent Innovation Development Regulation
For emerging tools such as QR code payments and facial recognition payments, regulation adopts an "inclusive and prudent" attitude: on one hand, it sets bottom lines, such as requiring the use of security certification technologies that meet national standards; on the other hand, it encourages exploration of innovation within a compliant framework. The use of cross-border payment tools strictly follows foreign exchange management regulations to prevent illegal cross-border capital flows. The application of regulatory technology (RegTech) is also deepening, enabling more precise identification of fraud, cash-out, and other risk behaviors through real-time monitoring of transaction data.
(C) Responding to New Risk Challenges
The main risks of non-cash payments focus on technical security, information leakage, and transaction fraud. Regulatory responses include: mandating payment institutions to enhance system protection levels, regularly conducting penetration tests and stress tests; strictly enforcing personal information protection requirements, clearly defining the minimum necessary principles for information collection and use; establishing and improving suspicious transaction monitoring and reporting systems, forming a joint effort with public security and judicial departments to combat illegal activities. In recent years, regulatory crackdowns on new money laundering channels such as "score-running platforms" and "virtual currency trading" have also intensified.
IV. Payment System Regulation: Ensuring Efficient and Smooth National Fund Clearing Arteries
Payment systems are the hub of fund clearing and settlement, including the High-Value Payment System (HVPS), Low-Value Batch Payment System (BEPS), Interbank Online Payment Clearing System (IBPS) operated by the Central Bank, as well as market-oriented clearing institution systems such as UnionPay, Wanglian, and Chengyinqing. The core regulatory goal is to ensure these systems operate stably, securely, fairly, and efficiently.
(A) Clear Regulatory Responsibilities and Institutional Framework
The "People's Bank of China Law" grants the Central Bank the supervisory and management responsibilities for the construction and operation of payment systems. The "Measures for the Administration of Payment Clearing Organizations" and "Regulations on the Supervision and Administration of Non-Bank Payment Institutions" further refine the management requirements for system access, operation, and exit. Regulation emphasizes that systems must comply with national cybersecurity standards, key infrastructure should be located within the country, and business continuity requirements must be met.
(B) Milestone "Disconnection of Direct Connections" and Centralized Custody
The "disconnection of direct connections" reform implemented in 2018 is a key battle in payment system regulation. The Central Bank requires that all non-bank payment institutions' network payment businesses must be processed through the Wanglian or UnionPay platforms, severing direct connections between payment institutions and banks. This move achieves two major goals: first, it centralizes and unifies the flow of transaction information, eliminating "black box" information and regulatory vacuums; second, it promotes the 100% centralized deposit of customer reserve funds with the Central Bank, fundamentally eliminating the risk of misappropriation of reserve funds and ensuring the safety of user funds.
(C) Comprehensive Operation and Maintenance and Risk Emergency Response System
The main risks faced by payment systems include technical failures, operational errors, and liquidity risks. Regulators require operating institutions to establish highly available disaster recovery systems, regularly conduct emergency drills and stress tests. At the same time, by setting clearing margin requirements and establishing liquidity mutual assistance mechanisms, they prevent chain risks arising from insufficient funds of participants. The Central Bank, as the "lender of last resort," provides liquidity support in extreme cases to maintain the stability of the entire system.
V. Payment Institution Regulation: Covering the Full Lifecycle of Market Entities
Payment institutions mainly include banking financial institutions engaged in payment business and non-bank payment institutions. Among them, the numerous and innovative non-bank payment institutions are the focus of regulation. The regulatory goal is to build a full lifecycle management system covering "entry - ongoing operation - market exit," guiding institutions to return to the essence of payment and focus on small and micro, convenient services.
(A) Increasingly Perfect Institutional Regulatory Rulebook
Led by the "Regulations on the Supervision and Administration of Non-Bank Payment Institutions," supplemented by the "Measures for the Custody of Customer Reserve Funds" and "Measures for Anti-Money Laundering and Anti-Terrorist Financing Management of Payment Institutions," a comprehensive regulation framework has been formed for non-bank payment institutions, covering capital, corporate governance, business compliance, user rights protection, and anti-money laundering obligations. The regulation of bank payment businesses also applies to special provisions in the payment sector and traditional banking regulatory laws such as the "Commercial Bank Law."
(B) Strengthening Ongoing Operation and Behavioral Regulation
Licensed institutions must operate within the business types and geographical scope specified in their licenses, and the transfer or rental of licenses is strictly prohibited. Regulation emphasizes "Know Your Customer" (KYC) and "Know Your Business" (KYB), requiring institutions to establish internal control mechanisms that match their risk profiles. In recent years, regulatory enforcement has significantly intensified, maintaining a high-pressure deterrent against behaviors such as "second clearing" (operating payment businesses without a license), providing channels for illegal transactions, and illegally collecting user data, with a noticeable increase in the frequency and amount of penalties.
(C) Promoting Industry Return to Fundamentals and Ecological Optimization
Regulatory policies clearly guide payment institutions to focus on their core businesses and reduce reliance on non-payment businesses such as interest income. Through measures such as classification ratings and differentiated regulation, high-quality institutions are encouraged to innovate and develop, while problematic institutions are pressured to rectify or exit. Industry self-regulatory organizations, such as the China Payment and Clearing Association, also play an important role in regulating market order, formulating industry standards, and mediating disputes. After years of governance, the concentration of the payment market has become reasonable, and the industry has shifted from rapid expansion to high-quality development.
VI. Summary and Outlook: Moving Towards a Smarter and More Open Era of Payment Regulation
After years of development, China's payment regulation has formed a "five-in-one" three-dimensional structure of comprehensive planning, account-based management, tool standardization, system stability, and institutional compliance. Supported by strong laws and regulations and increasingly advanced regulatory technology, China's payment industry has achieved a virtuous cycle of scale growth, controllable risks, and active innovation, with the inclusiveness and security of payment services ranking among the best in the world.
Looking ahead, the deepening of the digital economy, the iteration of financial technology, and the internationalization of the RMB will all bring new challenges to payment regulation:
Continuous Evolution of Regulatory Systems. There is a need for forward-looking research and the formulation of regulatory rules for emerging fields such as central bank digital currency (DC/EP), cross-border payments, open banking, and embedded finance to fill institutional gaps.
Deep Empowerment of Regulatory Technology. Utilizing technologies such as big data, artificial intelligence, and blockchain to build a real-time, precise, and intelligent risk monitoring and early warning network, achieving a shift from "post-event checks" to "prevention before events and control during events."
Strengthening International Regulatory Coordination. As Chinese payment companies "go global" and foreign payment institutions "come in," there is a need to actively participate in the formulation of international payment regulatory rules, deepen cross-border regulatory cooperation, and jointly address global risks.
Dynamic Balance of Development and Regulation. Always adhering to the bottom line of preventing systemic risks while leaving room for trial and error for payment innovations that genuinely benefit the real economy and enhance the convenience of people's livelihoods under controllable conditions.
In summary, China's payment regulatory system will continuously innovate itself while maintaining strategic stability, striving to create a safer, more efficient, fairer, and more open payment ecological environment, contributing solid payment strength to the construction of a new development pattern and promoting high-quality economic development.
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