BEIJING - The People's Bank of China (PBOC) on Monday said that non-bank payment service providers would need a license to conduct third party payment transactions in the nation.

Under the new rules, the companies will have to report to the central bank the commission rates it charges for third party transactions.

The companies would also be subject to periodic checks by the PBOC.

According to the central bank, the companies will have to apply for a license within one year after the policy comes into effect from Sept 1 onwards.

Analysts said the new rules will help regulate the online payment market, which reached 555 billion yuan ($81.4 billion) last year, up 135.6 percent from 2008.

Non-bank payment service providers will need to have a registered capital of at least 100 million yuan for a nationwide business license, and should have been making profits for two successive years, the central bank said.

"The policy will help in the healthy development of the online payment industry," said Cao Fei, an analyst with domestic research firm Analysys International.

The nation's online payment market has been growing at more than 100 percent annually in the past five years. It has also been attracting more and more players. According to industry experts, there are more than 100 online payment companies in China at present.

But at the same time, there are also problems due to lack of regulation.

Some online payment companies have been accused recently of making money through illegal activities. Online payment company 99Bill Corp allegedly helped a gambling company to collect funds of over 3 billion yuan, and one of its senior officials was detained.

"The license rule is fair for all online payment companies," said Wang Ziling, who looks after public relations at Alipay.com Co Ltd, the largest online payment company in China.

Alipay had a 52 percent share of the online payment market in 2009, followed by Tenpay, an online payment unit of Tencent, with 24.7 percent.

Since companies have to be profitable for at least two successive years, analysts said the policy will restrict entry of newcomers in the market.

As for foreign funded companies, the central bank will issue separate rules.

Cao from Analysys International said the new rules are likely to mean stricter requirements for foreign funded online payment companies.

China Daily

(China Daily 06/22/2010 page13)