The latest draft rules proposed by the People’s Bank of China signals even more regulatory tightening against the mainland fintech sector including the potential to even break up non-bank institutions deemed to hinder payment development.

The People’s Bank of China (PBoC) proposed this week that it could advise the state council’s antitrust committee to take action should non-bank institutions «severely [hinder] the healthy development of the payment service market».

Actions suggested include the ability to break-up non-bank financial institutions that are deemed to be too dominant and abusive of their leading market positions.

This spells more tightening for the likes of payment giants like Ant’s Alipay or Tencent’s Tenpay which own the majority of mainland China’s digital payment market share.

Monopoly Definition

According to guidelines released earlier this month, the PBoC defines a digital payments monopoly as any non-bank service provider with at least half of the market share for online transactions.  

Two non-bank providers with a combined market share of two-thirds or three providers with three-quarters will also qualify for antitrust investigations.

Two or three firms having less than a 10 percent market share will not trigger investigations, the PBoC added. 

Fintech Outlook

The new rules spell headwinds for China’s leading fintech giants whose dominance could at the very least potentially face supervision over capital adequacy requirements especially if they offer deposit products with interest rate payments, if not a full break up.  

While onlookers remain cautious, some have expressed optimism about limited intervention due the risk of such actions resulting in curbed innovation.  

«Globally, regulations have actually intensified […] to rein in the dominance of big tech. In our view, this is meant to prevent market abuse,» said UBS Global Wealth Management’s APAC CIO Min Lan Tan in a recent virtual roundtable. «[R]egulators will be careful not to stifle innovation. Significant changes in business models or breakup of companies, we think, is unlikely.»