A Happy New Year for China’s third-party payment companies

Written by Ken Ding || January 04 2012

On December 31st, New Year’s eve, the PBOC finally issued another 61 third-party payment licenses which probably were the best holiday gifts for the third-party payment companies who had been waiting for the new licenses.

 So, including the first and second batch of licenses, the PBOC has now released 101 payment licenses, with business scope including Internet payment; mobile phone payment, fix-line payment, bankcard acquisition, prepaid card issuance and acquisition, and money exchange. Industry insiders expect that PBOC will start to scrutinize the applications of third-party companies more stringently and slow down the release of licenses in the future.

According to PBOC’s rules, companies without payment licenses are forbidden to participate in any related business; the other 140 players who have yet to obtain licenses are facing a bleak future.

Ready for fierce competition

The new licenses will accelerate the development of China’s third-party payment industry and most big players in the payment industry, with the exception of sino-foreign joint ventures (who have yet to receive licenses), are preparing for increased competition. Among the third group of lucky players, China’s three mobile operators were also approved by PBOC to operate their mobile phone payment services, making Chinese mobile payment market more complicated and dynamic.

In the future, we believe that investment in the capital hungry third-party companies will increase driving both M&A and public offerings. As well, look for companies who did not receive a payments license yet to start looking at obtaining one through M&A.