What you should know
The Notice on Strengthening the Management of Payment Acceptance Terminals and Related Business No. 259 (“Notice 259”) issued by the People’s Bank of China on October 13, 2021, and effective from 1 March 2022, is the first legislation to regulate quick response (“QR”) code payments.
Notice 259 requires QR code payments to be aligned with traditional payments and prohibits Alipay or Wechat personal accounts to be utilised for the sale of goods and services. In other words, companies are required to register a company account with Wechat and/ or Alipay, so that the company may utilise the company QR code to collect payments from individuals or companies.
The provisions shall reshape commercial transactions made through mobile payments. Specifically, small and medium-sized businesses in China that often utilise individual accounts to collect payments, due to ease of payment, should be preparing for the changes and their impact on business operations – such as in the point of sale, business and account registration and other related procedures.
What are mobile payments in China
The rise of digital merchants’ payment applications via QR codes such as Alipay and WeChat Pay has fueled a near cashless society in China. Both Alipay and WeChat have enabled mobile users to link bank cards to their account, transfer and collect payment with other users and pay for goods and services both offline and online, as well as deposit funds in a wallet function.
For businesses, mobile payments have facilitated an online and offline ecosystem, in which payment of goods and services purchased either online or offline can be transferred from an individual account to a company account with low transaction fees. Equally, mobile payments have rapidly innovated everyday activities such as purchasing travel tickets, ordering a taxi, renting a bike, paying utilities, online shopping to be integrated into one digital ecosystem, and propelled the ease of payment transactions.
Notice 259 also addresses the upsurge of illegal activities triggered by mobile payments such as money laundering, online fraud, tax evasion, and criminal activities. Specifically, the purpose of account-to-account transactions is not required to be declared to the service providers, hence current commercial and personal transactions cannot be easily defined by the transaction alone. Under the reform, only company accounts registered with the business license can utilise the collect payments via the QR code.
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