Seven aspects of the payment industry trends

Recently, IMI academic member, deputy director of the National Finance and Development Laboratory and assistant director of the Institute of Finance of the Chinese Academy of Social Sciences Yang Tao wrote an article to analyze the innovation and development of China’s payment industry under the new environment and new situation. The article argues that, at present, China’s payment industry reflects characteristics such as scale growth, efficiency leadership, emphasis on security and confrontation with integration, but also faces challenges such as overly elevated status of mobile payment, unclear value objectives of payment industry development and differentiation of payment service consumers.

The development of China’s payment industry and current challenges, the current development of China’s payment industry reflects the following characteristics:

First, scale growth. Second, the efficiency of leading. Third, the importance of security. Fourth, confrontation with integration. Five is the two-wheel drive. Sixth is to find new opportunities. Seven is fully open. Eight is tiered regulation. Ninth is the standard self-regulation. Ten is clear authority and responsibility.

First, we need to avoid the extreme tendency of understanding the payment industry, the last two years from the public opinion, too high mobile payment status, and even called the “new four inventions”, or for payment innovation value “a stick to kill”, are harmful. Second, in the rapid development of the payment industry, there are still many unbalanced and inadequate contradictions that need to be resolved. Third, the value of the payment industry development goals are not clear, the need for sequential coordination. Fourth, the security of funds and information in the operation of payments still cannot be ignored. Fifth is the differentiation of payment service consumers. Sixth is the issue of payment service price. Seven, biometric + payment will become a hot spot of controversy. Eight, industry interest conflicts and coordination become more important. Ninth, payment data information statistics are still non-standard and inaccurate, easily leading to information asymmetry or misinterpretation among regulation, associations, institutions, organizations, academia and media. Tenth, the payment discourse system is not professional enough and lacks consensus and basis for discussion.

Policy recommendations for payment regulation:

One, bank account management is the first line of defense against money laundering, fraud and other activities. No matter how the account opening mechanism evolves, the real name account system should always be the core of risk management.

Second, due to the large differences in comprehensive capabilities among different banks, institutions that operate better in terms of asset quality, management level, technical capability, security risk control, etc. should be selected for localized remote account opening pilots. To further improve banks’ ability to screen high-quality customers and better serve small, medium and micro enterprises, they can also guide large high-quality e-commerce platforms, Saas supply chain platforms for small, medium and micro enterprises, supply chain finance platforms, etc., to assist in the piloting of public accounts. Since the pilot operation to full rollout cannot be achieved overnight, appropriate constraints on the operation of certain account functions during the transition period should be considered.

Third, further promoting the standardization and standardization of relevant technologies is the key to ensuring the authenticity of corporate customer identity and behavior.

Fourth, from the perspective of protecting consumer rights and interests, the supporting legal rules related to remote account opening should be further improved, and banks should be required to further improve and perfect their internal control mechanisms, such as identifying and guaranteeing the compliance and legality of electronic documents, images, signatures and data in the form of a system, and how to attribute responsibility in case of problems, etc.

Global trends. In the Financial Market Infrastructure Principles, financial market infrastructure is defined as “a multilateral system for clearing, settling or recording payments, securities, derivatives or other financial transactions between participating institutions”, and on March 5, the People’s Bank of China and six other ministries and commissions jointly issued the Work Plan for Coordinated Supervision of Financial Infrastructure. As can be seen, the development of the payment industry should be based on the perspective of financial market infrastructure and promote coordinated development in a comprehensive manner. In this perspective, how to determine the systemically important financial infrastructure, how to deal with the relationship between the payment system and other financial market infrastructures, how to deal with the relationship between PBoC and other financial regulators, how to solve the coordination problem of cross-border financial infrastructure, how to deal with the challenges of public network-based distributed financial market infrastructure, and so on and so forth a series of issues.

Efficiency trends. As one of the core elements of the financial system, the construction of the payment and clearing system also needs to solve the information asymmetry problem in transactions, improve the system’s economy of scale and matching efficiency, and reduce the industry’s search costs and transaction fees. Various new technology solutions can help better solve problems, improve efficiency and make risks manageable. For example, the common feature of retail payment innovation paths is around payment security, using network technology to develop various new solutions that are free from the constraints of traditional tangible identity and fund authentication carriers, and dedicated to making personal consumption and transaction payments more secure, convenient and efficient, free from the constraints of external carriers and intermediary links.

Structural trend. Payment market operation gradually shows structural differentiation characteristics. From the perspective of payment instruments, in 2019, banks handled 223.388 billion electronic payment services, amounting to 260.704 trillion yuan; non-bank payment institutions handled 719.998 billion network payment services, amounting to 249.88 trillion yuan. From the payment system, in 2019, the business volume of inter-bank payment system of bank cards increased more, processing business 21,135,175 million strokes, amounting to 173.60 trillion yuan, an increase of 280.62% and 44.32% respectively; the number of business strokes of intra-bank payment system decreased significantly, processing business 16,469 million strokes, amounting to 121,869 trillion yuan, a decrease of 55.12% and 8.51% respectively.

Inclusive trend. The application and development of technology is an effective path to solve the digital divide. The innovation and development in the era of financial technology requires getting rid of the “big work and fast” mentality and shifting to a more process-oriented and effective approach, with the urgent need to “make up for the shortcomings”.

Functional trends. At the tool level, mobile payment innovation has both direct and indirect effects on promoting consumption. The payment link has evolved from a bottleneck in the initial e-commerce service to an important vehicle for stimulating new consumption patterns. Commercial and public scenes related to food, clothing, housing and transportation can be used as typical scenarios for mobile payment. Relying on “payment+”, it is even expected to further improve the overall efficiency of the current business model. At the system level, through continuous construction and improvement of itself, it can further help the People’s Bank of China play a fundamental role in the implementation of monetary policy, regulate the volume and speed of money circulation, and serve as one of the important means for the People’s Bank of China to implement financial supervision, improve financial services, speed up capital turnover, and increase the efficiency of capital use, etc.

Security trend. As the regulatory thinking of the payment industry has become clearer in recent years, from the rectification of a single important link to the regulation of the whole process of payment, by realizing the closed loop of regulation of the payment industry chain, further clarifying the functions of payment in different links of transaction, clearing and settlement, etc., and more clearly defining the corresponding responsibilities and risks of participants. In the long run, more detailed screening of payment risks is currently needed to effectively identify potential systemic and non-systemic risks, financial and non-financial risks, etc. In order to further promote the safe development of the payment industry, especially to proactively adapt to the rapid development of payment technology, we should also vigorously promote the standardization of payment in various aspects such as technology, business and equipment.

Theoretical research. First, the field of large-value payments. It mainly analyzes the mode and participant behavior of large-value transactions, such as liquidity analysis, transaction time and participant behavior branches, interbank money market analysis, topology and network analysis, virtual scenario simulation analysis, etc. The second is the field of retail payment systems. For example, we analyze the impact of factors such as technological progress and industrial regulation on the retail payment industry, distinguish the types of consumer behavior, and provide innovative ideas, etc. The third is the field of securities clearing system. Such as studying the behavior of central clearing counterparties through modeling and simulation, etc.

Leave a Reply

Your email address will not be published. Required fields are marked *