Wang’Lian, the new clearing house for digital payments in China

Written by Felix Yang || December 14 2016

Since the start of this year, there have been many news about the set up of “Wang’Lian”, which means Non Bank Internet Payment Union, in China.

Last month, it has also received the approval from PBOC, the China central bank. Apart from the commentary last week, we also ran a further thinking about what may happen when Wang’Lian is expected to launch soon.

For Banks:

Banks are working to transform their businesses in China. For most players, retail banking and other Asset-Light business are getting more attention. For all the future developments, banks need the data of their customers’ payment behavior. Wang’Lian will let them have the valuable information. So it will be good news for them.

For Third Party Payment Companies:

For Alipay and WeChat Pay, who combined, control 70% of the digital payment market, probably will have less interest in Wang’Lian. They have built up their own empire controlling the payment channels and data for the last decade. Why would they give up their superiority? In addition, because no one else has access to it, the data they have accumulated privately is extremely valuable for many further possible uses. If Wang’Lian takes control of the information in the future, it may hit these big two companies heavily. However, there are also many small payment companies in China. They may welcome Wang’Lian as they can suddenly share the information for free. What is more, it will also set up the standard fee structure for everyone which may help the smaller companies and hurt the bigger ones. 

For Consumers and Merchants:

There won’t be many changes. It is not that different to let the data to be collected by Alipay/WeChat Pay or Wang’Lian. Also, Wang’Lian already announced no extra cost should be added onto consumers and merchants. It will also improve the safety of stored data under a standard system.

For the Government:

It is important to take control of the payment data, which is the requirement of a tight supervision. The transparency of the money transaction ensures that the government is able to track all the transactions, which may relate to corruption, tax evasion and anti money laundering reasons. That is one of the main reasons for PBOC and the China Payment Clearing Association to create Wang’Lian.

Comparing the attitudes from all parties involved, the key question is can the government make Alipay/WeChat Pay join Wang’Lian? A new clearing platform cannot affect the digital payment market much by itself, because Alipay/WeChat Pay already took most market share based on their E-commerce and Social platforms. As long as consumers stick to Taobao and WeChat, the two companies will control most of the digital payment channels. As a result, Wang’Lian will easily become another Union Pay, which has already lost the battle. If that happens again, there is no point for the government to move forward with Wang’Lian.