Decree of the People s Bank of China No.2 (2010)

Governor Zhou Xiaochuan

June 14, 2010

Administrative Measures on Payment Services Provided by Non-financial Institutions

Chapter I General Provisions

Article 1 This Measure is promulgated according to the Law on the People s Bank of China of the People s Republic of China in order to promote healthy development of the payment market and standardize the payment services provided by non-financial institutions, prevent payment risks and protect legitimate rights and interests of relevant parties.

Article 2 Payment services provided by non-financial institutions refer to money transfer provided in any of the following forms by non-financial institutions between a payer and a payee:

(1)On-line payment;

(2)Issuance and acceptance of prepaid cards;

(3)Acquisition of bankcards;

(4)Other payment services as identified by the PBC.

On-line payment refers to fund transfer on public or special networks, including remittance, Internet payment, mobile phone payment, fixed-line payment and payment via digital TV network and etc.

Prepaid cards refer to cards or pins issued with value stored using technologies such as magnetic stripes and chips which can be used to purchase goods and services provided not by the card issuer with the purpose of gaining profits.

Bankcard acquisition refers to an acquirer's acceptance of funds on behalf of licensed merchants that accept bankcard payment via payment terminals such as POS machines.

Article 3 In order to provide payment services, a non-financial institution should obtain a Payment Business License in accordance with this Measure to become a payment institution.

Payment institutions are under supervision and regulation of the PBC.

Without approval of the PBC, any non-financial institution or individual shall not engage in payment businesses in any forms, explicit or disguised.

Article 4 A payment institution shall entrust a banking financial institution to transfer funds with another payment institution and shall not transfer money with another payment institution by way of mutual deposit of such funds, nor entrust a third payment institution to conduct such transfer.

Payment institutions shall not provide fund transfer services for banking financial institutions unless otherwise permitted.

Article 5 Payment institutions shall observe the principle of secure, efficient and good-faith operation and fair competition and shall not undermine national interests, public interests of the society and legitimate rights and interests of customers.

Article 6 Payment institutions shall abide by AML laws and regulations and fulfill AML obligations.

Chapter II Application and Licensing

Article 7 The PBC is in charge of the issuance and management of the Payment Business License (referred to as the License hereinafter).

A License application shall be first reviewed by the local branch office of the PBC and then submitted to the PBC headquarters for approval.

The branch office of the PBC in this Measure refers to branches in cities of sub-provincial level and above.

Article 8 A License applicant shall meet the following requirements:

(1)The applicant shall be a limited liabilities company or a limited company lawfully incorporated within the jurisdiction of the People s Republic of China and should be a non-financial institution with legal person status;

(2)The applicant shall meet the threshold for registered capital as provided for in this Measure;

(3)Investors of the applicant shall meet requirements as provided for in this Measure;

(4)At least five members of the senior management of the applicant should know payment businesses well;

(5)The applicant shall take adequate anti-money laundering measures as required;

(6)The applicant shall have qualified equipments for payment businesses;

(7)The applicant shall have sound organizational structure and internal control system and take adequate risk management measures;

(8)The applicant shall have operation premises and take security measures in line with relevant requirements;

(9)The applicant and its senior management have not been penalized for irregularities or crimes by taking advantage of operation in payment businesses, or for providing payment services for criminal or illegal conducts in the recent 3 years.

Article 9 To apply to operate payment businesses nationwide, a payment institution shall have a minimum of 100 million yuan as registered capital; to apply to operate payment businesses within a province (autonomous region or municipality), a payment institution shall have a minimum of 30 million yuan as registered capital. The minimum registered capital should be paid-in capital.

The operation of payment businesses nationwide refers to the applicant applying to open branch(es) to operate payment businesses in another province (autonomous region or municipality) or to enable clients to make cross-provincial payment.

The PBC may adjust the registered capital threshold for applicants according to relevant laws, regulations and policies.

The PBC will release separate provisions on the scope of business of foreign-invested payment institutions, qualifications of foreign investors and requirements on the share of investment by foreign investors in another document and submit it for the approval of the State Council.

Article 10 Major investor(s) of an applicant should meet the following requirements:

(1)The major investor of a payment institution shall be a lawfully incorporated limited liabilities company or limited company;

(2)The major investor should have provided services to support information processing by financial institutions or for e-business activities for at least two consecutive years by the date of application;

(3)The major investor should have made profits for at least two consecutive years by the date of application;

(4)The major investor has not been penalized for irregularities or crimes by taking advantage of operation in payment businesses, or for providing payment services for criminal or illegal conducts in the recent 3 years;

Major investor in this Measure refers to investor(s) holding controlling shares of the applying institution and investors holding more than 10 percent of the shares of the applying institution.

Article 11 An applicant shall provide the following documents and materials to local branch office of the PBC:

(1)An written application stating the name, premise, registered capital, organizational structure of the applicant and specific payment business to be operated;

(2)Photocopy of the business license (duplicate) of the company;

(3)Articles of association of the company;

(4)Capital verification report;

(5)Financial statements audited by auditing agencies;

(6)Feasibility reports of the payment businesses to be operated;

(7)Materials verifying the adequacy of anti-money laundering measures taken by the applicant;

(8)Certificate of technological security;

(9)Biographical statements of senior management;

(10)Materials authenticating that the applicant and the senior management have no criminal records;

(11)Relevant materials of major investors;

(12)Statements ensuring the authenticity of application materials.

Article 12 The applicant shall publicly disclose the following information after receiving the PBC s notice of accepting the application for examination:

(1)Registered capital and equity structure of the applicant;

(2)Name list of, the ratio of shares held by major investors and financial situation of major investors;

(3)The specific payment businesses the applicant intends to operate;

(4)Operation premise of the applicant;

(5)Certificate affirming technological security of the equipment of payment businesses.

Article 13 Branch offices of the PBC shall accept the applications that have met the requirements and forward the results of preliminary examination and the application materials to the PBC headquarters. Where the application is approved after examination, the PBC will issue the applicant with a Payment Business License and notify such issuance.

The License is valid for 5 years since the date of issuance. Where the payment institution continues the payment business after the expiry of the License, the payment institution shall apply to renew the License to local branch office of the PBC within 6 months before its expiry. As approved by the PBC, the renewed License is valid for 5 years.

Article 14 When that the payment institution alters one of the following items, the payment institution shall get the approval of the PBC before filing an application for alteration at the registration agency of the company:

(1)Name, registered capital or organizational structure;

(2)Major investors;

(3)Merge or separation;

(4)Adjustment in the types or scope of business;

Article 15 A payment institution shall provide the following documents and materials to the local branch office of the PBC to apply for termination of its operation of payment businesses.

(1)A written application signed by the legal representative of the company with the name of the company, conducts of payment businesses, specific payment business to be terminated and the reasons for termination;

(2)Photocopy of business license (duplicate) of the company;

(3)Photocopy of the License;

(4)Plan to protect legitimate rights and interests of clients;

(5)Plan on how to dispose of the information of payment businesses.

Where approved, the payment institution shall complete the termination procedures as officially replied by the PBC and return the License.

Article 16 The items that have not been covered in this Chapter are subject to the Implementation Measures of Administrative Licensing of the People s Bank of China (PBC Decree No. 3 [2004]).

Chapter 3 Supervision and Regulation

Article 17 The payment institution shall not be engaged in businesses beyond the scope as examined and approved in the License and shall not outsource its businesses to others.

The payment institution must not transfer, lease or loan out its License

.

Article 18 A payment institution shall formulate measures on operating payment businesses and measures to guarantee the legitimate rights and interests of clients, and establish and improve the systems on risk management and internal control in line with prudential operation requirements. The measures mentioned above shall be filed with the local branch office of the PBC once taken.

Article 19 A payment institution shall define the charging items and charging standards for payment services it provides, which shall be filed with local branch office of the PBC.

A payment institution shall publicly disclose the charging items and charging standards of the payment services it provides.

Article 20 A payment institution should submit statistical statement, financial statement and other documents as required to the local branch office of the PBC.

Article 21 A payment institution should formulate a payment service agreement to identify the rights and interests, principles of dispute settlement, default liabilities and other relevant items of the payment institution and its customers.

A payment institution should disclose the standard terms of the agreement on payment services and file the agreement with the local branch office of the PBC for record.

Article 22 Where the subsidiary of a payment institution is in the payment business, both the payment institution and its subsidiary shall file with the local PBC office for disclosure purpose.

When the subsidiary of a payment institution terminates its payment business, they should go through the same procedure.

Article 23 When a payment institution accepts reserves from its client, it can only invoice the client for the service fee charged, not the amount of reserves.

Article 24 A payment institution does not have ownership over the reserves.

A payment institution can only transfer the reserves according to the client s payment instruction and must not divert the reserve money for any other purpose.

Article 25 A payment institution shall record the following in the client s payment instruction:

Name of the payer;

The specified amount;

Name of the payee;

Name of the payer s bank or payment institution;

Name of the payee s bank or payment institution;

Date on which the payment instruction is given.

Where a client makes a payment from a bank payment account, the payment institution shall record the account number. Where a client makes a payment from a non-bank payment account, the payment institution shall record the name and number of the client s valid identity document.

Article 26 Where a payment institution accepts clients reserves, it shall open a designated reserve account with a commercial bank to deposit the reserves, except where there are other requirements by the PBC.

A payment agency can only choose one commercial bank to deposit the reserves, and can only open one designated reserve account in any one of the branch offices of the commercial bank.

The payment agency shall sign with the headquarters of the commercial bank or its authorized branch offices a reserve deposit agreement to clearly define the rights, obligations and responsibilities of the two sides.

The payment agency shall file with the local PBC offices the reserves deposit agreement and the detailed information of designated reserve account.

Article 27 The branch of a payment agency must not open a designated reserve deposit account in its own name and can only deposit the reserves that it has accepted from its clients in the designated reserve deposit account opened by the payment agency.

Article 28 When a payment agency intends to adjust the positions of different designated reserve deposit accounts, the headquarters of the commercial bank where the accounts are opened shall review the balance of the accounts to be adjusted and inform the payment agency and the relevant bank the opinion of the review.

A payment agency shall take the headquarters review opinion and proceed with the position adjustment of designated reserve deposit accounts.

Article 29 The bank where the reserve is deposited shall monitor how the reserves are used and report regularly to the local PBC office information how the reserve is deposited and used.

The bank where the reserve is deposited shall reject the application or instruction from the payment agency for the use of reserves in violation of Articles 25 to 28. When the bank discovers illegal use of reserves or other abnormality, it shall report to the local PBC office and its own headquarters immediately.

Article 30 The ratio between the paid-in capital of a payment institution and the daily average outstanding reserve of clients should be no less than 10 percent.

The daily average outstanding reserve of a customer refers to the mean of total reserves of customers at the end of a day in the recent 90 days which is calculated by the headquarter of the bank where the reserve money is deposited with and managed.

Article 31 A payment institution should verify the validity of the identity certificate of a customer or other documents proving identity of a customer, and should register basic information of the identity of the customer.

A payment institution shall duly suspend payment services provided to a customer where the payment institution knows or should know the customer is engaged in irregularities or crimes by taking advantage of such payment services.

Article 32 A payment institution shall have in place necessary techniques to ensure the integrity, consistency and non-repudiation of payment orders, the timeliness and accuracy in the processing of payment businesses and the security of payment. A payment institution should be able to recover data from disaster damage and handle emergencies to ensure the continuity of payment businesses.

Article 33 A payment institution should keep business secrets of a customer as required by law unless otherwise regulated.

Article 34 A payment institution should properly keep customers basic identity information, payment businesses information and accounting records as required.

Article 35 A payment institution should accept on-site and off-site examinations of the PBC headquarter and its branch offices on a regular or ad hoc basis, and provide relevant materials in good faith. A payment institution must not refuse, obstruct or evade an examination, give false information, withhold or destroy relevant evidence or materials.

Article 36 The PBC and its branch offices shall conduct on-site and off-site examinations on the corporate governance, business conducts, internal control, risk situation and AML work on a regular or ad hoc basis according to laws, regulations and relevant rules of the PBC.

The PBC and its branch offices on-site examination over payment institutions is subject to the governance of the Procedural Rules on PBC Law Enforcement Examination. (The PBC s decree No. 1 [2010])

Article 37 The PBC and its branch offices may take the following measures when conducting on-site examinations over payment institutions:

(1)Requiring staff of the payment institution to explain examined items;

(2)Reviewing and copying relevant documents and materials related to examined items and sealing up documents and materials that may otherwise be transferred, concealed or destroyed.

(3)Examining designated reserves accounts and other associated accounts;

(4)Examining equipments of payment businesses and other relevant equipments.

Article 38 The PBC and its branch offices have the power to demand suspension in part or the entire payment business when one of the following happens to a payment institution:

(1)Its accumulative loss exceeds 50 percent of paid-in capital;

(2)There are major operational risks;

(3)There are major irregularities or crimes.

Article 39 In case of termination of a payment institution as a result of dissolution, closure by law or declaration of bankruptcy, the specific matters relating to liquidation shall be dealt with in accordance with the relevant provisions of laws and regulations of China.

Chapter 4 Penalties

Article 40 Personnel of the PBC and its branch offices will be subject to administrative penalties in one of the following cases and will be subject to criminal prosecution when a crime is committed:

(1)Approval of the application, alteration, termination or other items concerning the License in violation of existing regulations;

(2)Examination of payment institutions in violation of existing regulations;

(3)Disclosing national secrets or business secrets;

(4)Other behaviors abusing one s authority or negligence.

Article 41 The PBC and its branch offices shall demand a commercial bank to correct its irregularities within a specified timeframe in one of the following cases and the commercial bank is subject to warning or a fine of 10,000 yuan to 30,000 yuan. The PBC shall demand a commercial bank to suspend or terminate the deposit and management business of customers reserves in case of serious misconduct:

(1)Where a commercial bank fails to report information on the deposit, management or use of the customers' reserve money;

(2)Where a commercial bank fails to review the adjustment of deposit position under the designated reserves account of a payment institution as required;

(3)Where a commercial bank fails to refuse an application or order to use customers' reserve money that a payment institution sends in violation of regulations.

Article 42 The PBC and its branch offices will demand a payment institution to correct its irregularities in a specified timeframe in one of the following cases, and impose warnings and a fine of 10,000 yuan to 30,000 yuan to the payment institution:

(1)Where a payment institution fails to have in place relevant systems or to take risk management measures as required;

(2)Where a payment institution fails to file relevant information for registration as required;

(3)Where a payment institution fails to disclose relevant items as required;

(4)Where a payment institution fails to report or keep relevant data as required;

(5)Where a payment institution fails to alter relevant items as required;

(6)Where a payment institution fails to provide invoices to customers as required;

(7)Where a payment institution fails to keep business secrets of customers as required.

Article 43 The PBC and its branch offices will demand a payment institution to correct its irregularities within a given timeframe and impose a fine of 30,000 yuan on a payment institution in one of the following cases; The PBC will revoke its License in case of serious misconduct; where suspicious of criminal offense, the case will be sent to public security agencies for investigation; where a criminal conduct is committed, the committer will be subject to criminal prosecution.

(1)Where a payment institution transfers, leases or lend its License;

(2)Where a payment institution engages in business beyond its approved scope of business or outsource such businesses;

(3)Where a payment institution fails to deposit or use customers reserves as required;

(4)Where a payment institution fails to meet the threshold in the ratio between paid-in capital and customers' reserves;

(5)Where a payment institution suspends or terminates its payment businesses without appropriate reasons;

(6)Where a payment institution refuses or obstructs relevant examinations or supervision;

(7)Where a payment institution engages in other irregularities or crimes undermining the sound operation of payment institutions, legal rights and interests of customers or the operation of the payment service market.

Article 44 The PBC and its branch offices will penalize a payment institution that fails to fulfill its AML obligations according to AML laws and regulations; and the PBC will revoke its License in case of major irregularities.

Article 45 Where a payment institution continues to engage in payment businesses after the expiry of its License, the PBC and its branch offices will demand the payment institution to terminate its payment businesses; where suspicious of criminal offense, the case will be sent to public security agencies for investigation; where a crime is committed, the payment institution will be subject to criminal prosecution.

Article 46 Where a payment institution fails to acquire a License due to inappropriate means of application such as fraud, the applicant and investors who hold more than 5 percent of the equities of the applicant are forbidden to reapply or participate in the application for the License within 3 years.

Where a payment institution has acquired a License through inappropriate means in application such as fraud, the PBC and its branch offices will demand the payment institution to terminate its payment businesses and revoke its License; where suspicious of criminal offense, the case will be sent to public security agencies for investigation; where a crime is constituted, the payment institution will be subject to criminal prosecution; the applicant and investors who hold more than 5 percent of the equities of the applicant are forbidden to reapply or participate in the application for the License within 3 years.

Article 47 The PBC and its branch offices will demand to terminate the payment business of any non-financial institution or individuals that have engaged in payment businesses without the approval of the PBC or in disguised forms; where suspicious of criminal offense, the case will be sent to public security agencies for investigation; where a crime is constituted, the payment institution will be subject to criminal prosecution.

Chapter V Supplementary Provisions

Article 48 Non-financial institutions engaged in payment businesses before the release of this Measure shall apply for and acquire the License within 1 year after the day of release of this Measure. The engagement in payment businesses is not allowed if the License is not acquired within the time limit.

Article 49 The PBC is responsible for the interpretation of this Measure.

Article 50 This Measure will be effective as of September 1, 2010.