Large tech companies that engage in financial activities will face more stringent regulations, and platform companies offering financial services should follow the ‘same business, same rules’ principle, the bank’s governor pledged. Central China at an international meeting.
“In the age of the digital economy, the integration between finance and technology is a global trend,” said Yi Gang, governor of the People’s Bank of China (PBOC), in a pre-recorded speech at a conference held Thursday by the Bank for International Settlements.
While applauding the convenience, efficiency and inclusion brought by big tech financial innovations in business such as mobile payments and internet consumer credit lending, Yi added that a common challenge was to know how to improve innovation while preventing the negative effects of fintechs.
FinTech companies have posed new regulatory challenges as some of them conduct unlicensed financial activities and collect massive user data through e-commerce, payments, and search engine services.
In the name of supporting lending activities, some leading platform companies help financial institutions analyze user behavior and creditworthiness without relevant regulatory clearance.
They also offer wealth management, investment and insurance services on the same platform, increasing the possibility of cross-product and cross-industry risk contagion.
The “winner takes all” nature of platform companies could lead to a market monopoly, overturn the rules of the game and threaten privacy and information security, the central banker noted.
In addition, big technologies have posed challenges for the traditional banking sector, according to Governor Yi. Nearly 4,000 small Chinese banks have no other choice but to rely on platform companies to develop their businesses, which will compromise their competitiveness and their ability to gain customers.
To address these challenges and close regulatory gaps, Chinese regulators have made concerted efforts to promote fair competition and protect consumer rights.
“Financial activities must be allowed to operate,” the central governor stressed, adding that inappropriate connections between financial information and business information should be “cut”.
Regarding payment activities, for example, the People’s Bank in 2016 asked non-bank payment service providers to cut their direct links with commercial banks and provide clearing services through legitimate clearing institutions.
Since the end of last year, non-bank payment service providers have been prohibited from setting their consumer credit products as default payment options and have been required to provide consumers with more payment choices. .
“We will strengthen regulatory measures on payment business in the future,” Yi said.
In September 2020, the central bank asked platform companies that conduct financial activities to create a financial holding company and separate their technology departments from financial activities.
“Platforms offering financial services should follow the ‘same business, same rules’ principle,” said Yi.
To break the information monopoly and promote information sharing, Chinese regulators recently announced their intention to restrict the use of personal credit data.
Governor Yi noted that the PBOC has asked technology platform operators to carve out their personal credit information business and provide credit information services to financial institutions through credit information agencies. approved credit.
Since 2016, China has enacted several laws and regulations to better protect people’s data rights and to combat irregularities in information collection.
“In the future, we will continue to improve the rule of law and ask all financial services to be licensed,” he pledged, noting that China is willing to participate in the development of international rules. around the digitization of financial services to prevent anti-competitive behavior and strengthen consumer data protection.
Thanks to the help of digital businesses, China’s mobile payment penetration rate reached 86%, and the number of small and micro businesses receiving loans from Chinese banks had reached more than 38 million by the end of July. .
China is now home to around 1 billion internet users, a solid foundation for fintech adoption, and five of the world’s 20 largest platform companies in 2020 were from China.