Grace Chiang (Taipei)
Joline Chen (Shanghai)
While the mobile payment industry has developed prosperously thanks to the wide mobile device applications in recent years, there are grey areas in the regulatory aspect because it often overlaps with the strictly regulated financial institutions for providing the payment and fund transfer services, as well as its novel industrial characteristic. To follow the technological trends and encourage the emerging industries, the cross-strait governments have been actively promoting appropriate application of laws and regulations to the mobile payment industry. In addition to the existing regulatory system for the financial institutions, positive efforts have been made to develop a regulatory system exclusive for mobile payment services operated by non-financial institutions.
The Taiwan Affairs Office of the State Council in mainland China (hereinafter, the “TAO”) and the National Development and Reform Commission promulgated the Specific Preference Policies for Promoting Cross-Strait Economic and Cultural Exchange (hereinafter, the “31 Preference Policies for Taiwan”) on February 28, 2018. The “31 Preference Policies for Taiwan” stress that the Taiwanese and Taiwan-funded companies will be equally treated with the mainland Chinese nationals and companies. Also, a portion of the policies specifically indicating an attitude towards encouraging cooperation between cross-strait “small payment” industry. In this regard, this essay will briefly introduce the current laws and regulations of mobile payment industry in Taiwan and mainland China, following which the potential breakthroughs and impact of the 31 Preference Policies for Taiwan on the cross-strait mobile payment industry.
1.Major laws and regulations of the cross-strait mobile payment industry of non-financial institutions, and their current investment status
1.Taiwan
(1)Major laws and regulations
In Taiwan, non-financial industries of mobile payment are divided to three categories–“electronic payment,” “electronic stored-value cards,” and “third-party payment”–which are separately regulated under different laws and regulations by different competent authorities.
The main differences among operators of the three aforementioned categories lie in their different allowable services. In short, an electronic payment institution may operate stored-value and fund transfer services;[1] an electronic stored-value card institution may operate stored-value services;[2] a third-party payment institution may only operate “service of custody and payments on behalf of others” and cannot operate stored-value and fund transfer services.[3] The establishment threshold for the operators of the three categories is different as well. The threshold for an electronic payment institution is the highest and requires a paid-in capital of at least NT$500 million;[4] the minimum paid-in capital required for an electronic stored-value card institution is NT$300 million;[5] while no requirement on the paid-in capital of a third-party payment institution basically.
However, for an operator failing to meet the above establishment requirements to operate as an electronic payment or electronic stored value-card institution, operating relevant services is still allowable after obtaining the “innovative experiment permit”[6] (i.e., through the “financial regulatory sandbox” system).
(2)Current investment status in Taiwan from mainland Chinese investors
Currently, mainland Chinese investors are not allowed to invest in electronic payment, electronic-stored value card, or third-party payment business in Taiwan.[7] Therefore, non-financial institutions of electronic payment in mainland China are still not allowed to set up their office in Taiwan, or to invest in Taiwan electronic payment, electronic stored-value card, or third-party payment business.
However, Alipay and WeChat Pay have launched a service for mainland Chinese users to pay in Taiwan convenient stores, department stores, and night market vendors, by working with Taiwan banks with the Cross-Border Payment Service License.[8] Yet Taiwanese are not allowed to use mainland China electronic payment services through debit cards issued by Taiwan banks currently.
2.Mainland China
(1)Major laws and regulations
Non-financial institutions of all the payment-related service (i.e., “institutions providing monetary fund transfer services for collectors and payers”) are collective referred as “non-financial payment institutions,” e.g., Alipay, WeChat Pay, etc., and are regulated primarily under the Administrative Measures for the Payment Services Provided by Non-financial Institutions, and collectively regulated by the People’s Bank of China and its affiliates.[9]
A non-financial institution seeking to operate payment services is required to obtain a “Payment Business License”. Major requirements of the license include:[10]
(i)The institution shall be a limited liability company or a company limited by shares in mainland China;
(ii)The contributors and high-level managerial officers shall meet specific requirements;
(iii)The registered capital shall exceed RMB30 million or RMB100 million (depending on the area in which the services are provided). However, the People’s Bank of China can adjust this threshold pursuant to national laws, regulations or policies.
In addition, with respect to “mobile payment” institutions relying on the Internet and fulfill the funds transfer through mobile devices, several mobile payment institutions (including banking and non-banking payment institutions, such as Bank of Beijing, UnionPay and Alipay, etc.) have jointly set up the “Self-Regulatory Mobile Payments Committee,” whose members all comply with the “Self-Regulatory Convention for the Mobile Payment Industry.”
(2)Current status of investment in mainland China from Taiwanese investors
The People’s Bank of China issued an announcement in March 2018:[11]
“To provide electronic payment services of domestic or cross-border transactions for entities within the territories of the People’s Republic of China, an overseas institution shall establish a foreign-funded enterprise within the territories of the People’s Republic of China, and obtain a ‘Payment Business License’ pursuant to the requirements and procedures stipulated in the ‘Administrative Measures for the Payment Services Provided by Non-financial Institutions’…”
According to this announcement, a Taiwanese non-financial institution may set up a “foreign-funded enterprise” in mainland China, obtain a “Payment Business License (see Paragraphs I.2.(1) above for details), and meet specific requirements (such as compliance with laws and regulations relating to cyber security) to provide electronic payment services in mainland China. Since electronic payment institutions are not defined as banks (i.e., financial institutions), mainland China government does not impose restrictions on foreign investors’ investments in electronic payment institutions.[12] That is, since mainland China has allowed foreign investors to invest and set up payment institutions, Taiwanese electronic payment institutions already have opportunities to set up their office in mainland China, and Taiwanese investors are able to invest in the electronic payment industry in mainland China as well.
II.The 31 Preference Policies for Taiwan provisions and released local measures concerning “mobile payment”
1.Article 10 of the 31 Preference Policies for Taiwan
“Taiwanese financial institutions and merchants can, pursuant to law, cooperate with UnionPay and other non-banking payment institutions in mainland China to provide convenient small amount payment services for Taiwanese individuals.”
Through industry opinions, some believe that such policy may gradually lead to the permissibility of using the electronic payment in mainland China with debit cards issued by Taiwan banks, or the issuance of UnionPay cards by Taiwanese financial institutions; moreover, the cross-strait electronic payment institutions (e.g., Alipay in mainland China and O’pay in Taiwan) may even be allowed to set up their office at the other side.
However, through a preliminary reading of the wording, this policy targets on “financial institutions” and “merchants” in Taiwan; without any other detailed regulations defining the “merchants.” Therefore, whether the “merchants” include Taiwanese non-financial electronic payment institutions cannot be determined currently until further details and measures are released by mainland China government. In other words, it is unable to determine if such policy also applies to Taiwanese non-financial electronic payment institutions currently. However, as the People’s Bank of China have announced that foreign non-financial institutions are allowed to set up electronic payment institutions in mainland China, Taiwanese non-financial institutions of electronic payment can, in fact, set up their office to provide electronic payment services in mainland China without this policy. Therefore, even if this policy does not apply to Taiwanese non-financial institutions of electronic payment, the objective permissibility for their provision of electronic payment services in mainland China will not be affected though.
In addition, the contents of this policy do not indicate the specific preferential measures for Taiwanese “financial institutions” and “merchants”, e.g., what is the meaning of ” pursuant to law” and what is the “content of the cooperation?” None of these was specifically addressed and is not clear until further specific detailed regulations are promulgated by the central government of mainland China. In addition, no specific measures concerning this policy has been released by local governments except for Xiamen currently. Therefore, how local governments in mainland China will carry out the “cooperation” of cross- strait institutions and merchants under this policy will be clear only when further specific measures promulgated by local governments in mainland China.
(2)Article 46 of the “Specific Measures for Further Deepening the Economic and Cultural Cooperation between Xiamen and Taiwan” promulgated by Xiamen local government
“Promote the cooperation between Taiwanese-funded financial institutions and merchants and UnionPay in Xiamen, and establishment of UnionPay’s dedicated institutions in Xiamen for cross-strait business cooperation. Promote the non-banking payment institutions in Xiamen to expand the types of their Internet business and their business cooperation with Taiwan-funded financial institutions and merchants. Encourage the financial institutions in Xiamen to optimize the financial services to Taiwanese individuals, provide convenience for card application or account opening application by Taiwanese individuals to facilitate their use of electronic payment services in mainland China.”
According to the content of the above measures released by Xiamen government, Xiamen government primarily focuses on the following aspects of the cross-strait electronic payment :
1.Promote the cooperation between Taiwan-funded financial institutions, merchants and UnionPay and non-banking payment institutions in Xiamen.
2.Promote the convenience for Taiwanese users’ account opening application at a financial institution, and their use of electronic payment.
First, the Item 1 above merely reiterates Article 10 of the 31 Preference Policies for Taiwan without specifically indicating the specific content and scope of the so-called “cooperation.” For example, whether such measures can resolve the issue that users cannot use electronic payment services in mainland China with debit cards issued by Taiwan banks is still unclear. Itis necessary to follow up on further detailed measures subsequently promulgated for the specific content and scope of the so-called “cooperation”.
With respect to Item 2 above, since a real-name registration system is implemented in mainland China, users are required to register with a bank account in mainland China before using electronic payment services in mainland China (such as Alipay or WeChat Pay);thus Taiwanese users should have a bank account in mainland China before they may use electronic payment services in mainland China. However, when applying to open a bank account in mainland China, Taiwanese are strictly required by many banks to provide a “work certificate,” a “residence certificate”, or even a tax number in mainland China, in addition to a Taiwan Compatriot Pass. And many Taiwanese have been rejected by several banks when seeking to open an account in mainland China. Therefore, the measure released by Xiamen government indicated in Item 2 above may resolve such issues so that it will be easier for Taiwanese to access financial services in Xiamen (such as opening a bank account) or even electronic payment services. However, through a preliminary reading of the wording, this measure probably only applies to Taiwanese “individual users,” and thus is relatively unrelated to cross-strait cooperation of the electronic payment industry.
III.Brief conclusions
According to statistic data released by the People’s Bank of China, a total of 9,286.747billion transactions were generated from the online payment services of non-banking payment institutions in mainland China in 2017 with a growth rate close to 75%. And the trading amount totaled RMB143.26 trillion with a growth rate of around 44%.[13] The mobile payment market in mainland China is continuously expanding with steady growth in transactions amount. Since the China government is actively promoting financial reform and the scale of deregulation, the mobile payment market in mainland China is absolutely attractive to payment institutions and investors worldwide.
The 31 Preference Policies for Taiwan, which apply exclusively to Taiwanese enterprises, are a regulatory document. Although the content is general and how the policy will be carried out, how different departments and commissions in mainland China will accommodate and integrate for the policies, and how the central government and local governments will implement the policies are yet to be clarified through further detailed regulations promulgated in the future, still the TAO’s spokesman openly stated that the 31 Preference Policies for Taiwan seek to “provide the same treatments to Taiwan-funded enterprises and Taiwanese as mainland Chinese enterprises and mainland Chinese, and will definitely benefit Taiwan-funded enterprises for their investment and business in mainland China as well as Taiwanese for their personal development in mainland China.” Therefore, through such policies, the mainland China government has specifically declared the policy direction of providing equal or even preferential treatments to Taiwanese enterprises. Furthermore, the mainland China government is also showing significant attention and support to the mobile payment industry and has allowed foreign investors to access the payment market in mainland China.
Therefore, in light of the current opportunities presented by mainland China government for foreign-invested enterprises to access the payment market in mainland China, and along the mainland China government’s declaration of benefiting Taiwanese enterprises through the 31 Preference Policies for Taiwan, in the future, various departments, commissions and local governments in mainland China will promulgate more concrete measures in accordance with the 31 Preference Policies for Taiwan . It is possible that Taiwanese financial institutions and merchants will be able to access the payment market in mainland China under more favorable conditions than other foreign enterprises then, which is expected to be a promising advantage for Taiwanese institutions. Since how the 31 Preference Policies for Taiwan will be carried out is pending further observations, not to mention the detailed regulations and concrete measures released by local governments in mainland China will be different, we suggest the Taiwanese mobile payment institutions and investors understand the restrictions under relevant laws and regulations in mainland China, and stay tuned to any laws, regulations, policies and measures successively promulgated by local governments in mainland China.
[1] (Taiwan) Statute Governing Electronic Payment Institutions art. 3 (last browsed on May 28, 2018)
[2] (Taiwan) Statute Governing the Issuance of Electronic Stored-Value Cards art. 3, subpara. 1, last browsed on May 28, 2018
[3] (Taiwan) Self-regulation on Credit Card Acquirers “Signing up ‘Platform Service Providers of custody and payments on behalf of others’” as Merchants item 7, last browsed on May 28, 2018
[4] (Taiwan) Statute Governing Electronic Payment Institutions art. 7, para. 1, last browsed on May 28, 2018
[5] (Taiwan) Statute Governing the Issuance of Electronic Stored-Value Cards art. 6, last browsed on May 28, 2018
[6] (Taiwan) Statute Governing Electronic Payment Institutions art. 3-1; Statute Governing the Issuance of Electronic Stored-Value Cards art. 5-2, last browsed on May 28, 2018
[7] (Taiwan) Please refer to the “Industry and Item List of Investment by Mainland China Citizens” issued by MOEA, last browsed on May 28, 2018
[8] (Taiwan) The competent authority is the Financial Supervisory Commission, which has prescribed the Administrative Rules for Cooperation with or Assistance to Foreign Institutions to Engage in Electronic Payment Institution Business in Taiwan
[9] (Mainland China) Administrative Measures for the Payment Services Provided by Non-Financial Institutions art. 3, last browsed on May 28, 2018
[10] (Mainland China) Administrative Measures for the Payment Services Provided by Non-Financial Institutions art. 8 and art. 9, last browsed on May 28, 2018
[11] (Mainland China) Announcement [2018] No. 7 of the People’s Bank of China, last browsed on May 28, 2018
[12] (Mainland China) Catalogue Guiding Foreign Investment in Industries (Amended in 2017), last browsed on May 28, 2018
[13] (Mainland China) The Overall Operating Status of the Payment System in 2017, last browsed on May 29, 2018