March 22, 2018
The People’s Bank of China (PBOC) this week unveiled plans to open its $27 trillion payments market to foreign companies. Foreign payments companies now can apply for licenses to operate in China under several conditions.
The PBOC said it will require any company that wants to facilitate payments for Chinese businesses to have a physical domestic presence in the country and the infrastructure it uses to process transactions must exist locally. Disaster-recovery plans, sufficient capital and anti-money laundering systems that adhere to the same standards as Chinese payment firms also are required for licensure.
According to the announcement, plans have been in the works for nearly a decade to open China’s payments market to outside companies and that open competition, ensuring information security and providing regulatory guidance are the basic principle by which the Chinese will govern foreign companies in payments.
Experts weighing in so far said foreign payments providers might find the competitive environment for domestic transactions challenging. They will likely have more success enabling cross-border transactions initially.