The Chinese government’s move to crack down on the P2P lending industry is likely going to drastically affect the spending and lending habits of Chinese consumers.
Per the new guidelines jointly proposed by a body of 10 agencies, including the central bank and banking and security regulators, a limit of 5,000 yuan (approx. $780) per day would be placed on online transactions, which cannot be verified by electronic signatures and digital certificates.
The new proposal rules, which are particularly directed at tightening ropes around P2P lenders, many of which reportedly fled the market with customers’ money, would affect about 2,000 P2P lenders in the country.
If approved, third-party payment providers would be prohibited from holding accounts for financial institutions involved in wealth management, P2P lending, crowdfunding and investing among a range of other financial services, Caixin reported.
As the regulations would consolidate the widely scattered online Chinese financial industry, the new rules would mostly result in the rise of operational costs, which would eventually cause the small and weak players to lose the market to big players like TenPay and Alibaba.
With new limits on online transactions, banks would benefit from regaining customers previously lost to the online P2P industry, and the Chinese stock index would benefit from reduced investor borrowing, which would add stability to the exchanges.
The central bank, which is one of the 10 agencies developing the proposal, is currently accepting and considering public responses on the proposal until Aug. 28.
The proposal is also demanding that third-party suppliers provide an authentic business name, physical address or five personal identity verification steps for each of the clients. If passed into law, financial institutions would only be allowed to provide a range of financial services such as wealth management and money transfer, among others. However, the institutions avoiding the five-step authentication process would only be allowed to process up to 200,000 yuan (approx. $31,000) worth of online transactions per annum.
[vc_row full_width=”” parallax=”” parallax_image=””][vc_column width=”1/1″][/vc_column][/vc_row][vc_row full_width=”” parallax=”” parallax_image=””][vc_column width=”1/1″][vc_separator color=”grey” align=”align_center” style=”” border_width=”” el_width=””][vc_single_image image=”148412″ alignment=”center” style=”vc_box_shadow_3d” border_color=”grey” img_link_large=”” img_link_target=”_blank” css_animation=”left-to-right” img_size=”full” link=”http://www.pymnts.com/whats-hot-today/”][vc_column_text css_animation=””]
To check out what else is HOT in the world of payments, click here.
[/vc_column_text][vc_separator color=”grey” align=”align_center” style=”” border_width=”” el_width=””][/vc_column][/vc_row]
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More