The People’s Bank of China (PBOC) has released regulation which stipulates that starting June 30, 2018, all online payments made in China linked to bank accounts will be processed through a centralized online payment clearing platform.
This will allow financial regulators to protect consumers and strengthen risk control over the third party payment industry as the current system allows such institutions the possibility to misuse consumers’ settlement reserves. Settlement reserves are paid by customers to process authorized transactions before the delivery of goods is made.
The frequency of misappropriation of consumer payments have increased in the past few years with the rise of the e-commerce sector, most commonly being used as working capital invested in high risk projects or wealth management projects, causing significant losses for consumers.
The new regulation will cut out the possibility of funds misappropriation, and circumvent inefficient payment settlement processes.