New policy puts revenue squeeze on China’s payments giants – TechCrunch
What happened: This week, restrictions kicked in requiring non-bank payment companies to pass all transfers through a centralized clearing system. The move was announced two years ago in order to give companies time to transition. Previously, third-party payment companies were able to temporarily place money from buyers into interest-bearing bank accounts, adding to their earnings. Mobile payment giants Tencent and Ant Financial declined to comment on how much they earned from interest, but said they have fully complied with the regulations.
Why it’s important: The move is part of the central government’s effort to reduce financial risks. It’s unclear how much money third-party companies will lose as a result. However, an industry insider told TechCrunch it’s possible such enterprises will see a drop in “bargaining power” with banks, which level commissions for handling payments. In addition, Tencent and Ant Financial aren’t the only ones affected by the change: even if they do process over 90% of mobile payments, they make up only a third of all online transactions, which include payments made over phone and PC.