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New digital payment rules likely to hit Ant Group, Tencent

Ant Group fintech digital payment antitrust

The People’s Bank of China has proposed new antitrust rules for non-bank digital payment companies, which are likely to pressure the duopoly held by Ant Group and Tencent over the market.

Why it matters: The rules set the standard for monopolistic behavior in China’s third party digital payment market. If implemented, they are likely to trigger regulatory scrutiny of Ant Group and Tencent.

  • The move is part of a wider regulatory antitrust clampdown on tech companies and particularly on fintech, but it is the first to target the digital payment sector.
  • Sources have told TechNode that Ant Group and Tencent’s online payment duopoly does not sit well with banks and authorities, but there had been little to no regulatory movement to curb their power.

READ MORE: CHINA VOICES | The unsigned op-eds that foreshadowed Ant Group IPO suspension

Details: The new rules set market share thresholds for the “confirmation of market dominant position,” which might trigger a regulatory review. If non-bank online payment companies exceed these thresholds, the central bank will consult with the antitrust watchdog to determine whether the company or companies have engaged in monopolistic behaviors.

  • For a single third-party payments provider, the market share threshold is half of the market; two-thirds of the market for two providers’ combined share; for three providers’ combined market share, the limit is 75% of the market.
  • If one of the multiple-party payment providers accounts for less than 10% of the market, it will not be included in the anti-monopoly review.
  • Ant Group individually and in combination with Tencent exceeds these thresholds. Ant Group holds 55.6% of China’s market for digital payments, and Tencent accounts for 38.8%, a June 30 report from market intelligence firm iResearch said.
  • The rules also set early warning thresholds, which are lower than the “confirmation” thresholds, and might mean key personnel is called in for interviews.
  • The draft rules are open for comment until Feb. 19.

Context: Regulators have been trying to rein in big tech in the last few years. Regulatory efforts have intensified, however, since Ant Group’s initial public offering in Shanghai was abruptly halted in November.

  • Sweeping antitrust rules were released in the days following the Ant Group listing fiasco. Soon after, Alibaba, an SF Express subsidiary, and a Tencent-backed platform were fined for failing to report acquisition deals for antitrust reviews.
  • The central bank released a technical document to standardize the use of AI and big data in payment risk prevention on Jan. 4.

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