Chinese central bank policymaker says fintech needs regulation, so do banks

BEIJING – China’s central government is making it clear that fintech companies like Ant Group are subject to the same strict financial regulations as banks.

Many start-ups in China and other countries are using new technology to sell cheaper and faster financial services, from money transfers to loans. The rapid adoption by consumers has prompted banks to work with start-ups, which often insist that they are tech or fintech companies, rather than financial institutions.

“But fintech is still finance in essence, so the ‘same company, same rules’ principle should apply,” Pan Gongsheng, vice-governor of the People’s Bank of China, wrote in an opinion piece on Wednesday. in the Financial Times. Pan also heads the national exchange regulator, the State Administration of Foreign Exchange.

“We need regulations that focus on the substance and not the form of a business,” added Pan. “The goal is to align trade rules and standards with regulation to avoid arbitrage.”

Chinese authorities have stepped up regulations on fintech companies in recent months.

More importantly, regulators abruptly suspended Alibaba-affiliated Ant from listing in November, just days before the company held what would have been the largest initial public offering in the world.

Pan did not mention Ant by name in the editorial, but noted that the “non-bank mobile payment business, led by Alipay and WeChat Pay” has grown by 75% per year between 2015 and 2019 in non-bank mobile payments. Ant Group owns Alipay, and WeChat Pay is operated by Tencent.

He added that fintech companies pose the same risks as others in the financial industry, and could also collect “excessive” amounts of data and violate user privacy.

Chinese central bank governor Yi Gang said on Tuesday that Ant could resume the IPO process if he could resolve any legal issues.

Read the full Financial Times opinion piece here.