(Beijing) – The central bank should rein in the growth of online payment service providers in light of problems and risks associated with them, government researchers say in a recent report. The report drafted by the regulator's internal research unit recommended that the central bank raise the entry threshold for the market and encourage the existing 270 license holders to merge. It did not provide a number for how many companies the market should have. The report, which Caixin reporters have read, has not been published. The central bank recently released what has been viewed by many people as the toughest-ever regulation on third-party payment companies, requiring them to verify user identities and limit the payment amounts they can handle for different purposes, citing risk concerns. Data from the regulator shows that the country's third-party payment firms handled more than 14 billion transactions worth 9.1 trillion yuan in the first quarter of the year, up 120 percent and 85 percent from the same period last year. Of the 270 licensed payment service companies, only 117 are permitted to handle payments online. The market is heavily concentrated, with the top eight service providers occupying more than 98 percent of the market, the report said, citing data from iResearch, which studies Internet-based industries. "Champion enterprises such as Alipay, Tenpay and China UnionPay have the majority of the market share, while many other Internet payment service providers have struggled, operating at a loss for a long time and their survival remaining in question," the report said. Alipay is owned by Ant Financial Services Group, which itself is linked to Alibaba Group Holding Ltd. Tenpay is owned by Alibaba's rival, Tencent Holdings Ltd. China UnionPay is the country's sole clearing service provider for yuan-denominated bankcard payments. In face of the fierce competition, many companies lower risk control standards to pursue more customers and greater market share, the report said. Inspections have found that many companies have failed to meet the central bank's requirements regarding real-name registration, funds management and anti-money laundering issues. It pointed out that the regulator had found some payment service providers taking money from client accounts to buy wealth management products, repay debts and even pay salaries. Some companies were also found delaying refunds of client money so they could use it for longer. It also noted that third-party payment companies are at a high risk of leaking user data and causing them losses particularly because of the many innovative ways they invented of making payments, such as by scanning codes. "In cases where there are loopholes in their core operation systems or when their internal control and management fails, there will be risks including money getting stolen, user data leaked and virus infections," the report said. It also said it is easier for criminals to launder money and illegally take out loans through the services provided by payment companies. (Rewritten by Wang Yuqian) You've accessed an article available only to subscribers VIEW OPTIONS
A report compiled by a Chinese regulators has advised the country 's central bank to clamp down further on online payment service providers by raising the payment threshold for the market and by encouraging the existing 270 operators in the market to merge . New rules have already been implemented that have been viewed as the toughest - ever regulation on third - party payment companies , requiring them to verify user compliance and adjust the payment amounts they can collect for different purposes .