The role and challenges of third-party payment institutions in cross-border payments

With the acceleration of globalization and the continuous expansion of the e-commerce market, third-party payment institutions are playing an increasingly important role in global trade. These institutions have won the favor of many users for their convenience and efficiency. However, with the expansion of business scale, the problems encountered by third-party payment institutions in the cross-border payment process have become increasingly prominent.

First of all, from a legal perspective, the positioning of third-party payment institutions is not clear enough. Although the “Guiding Opinions on the Pilot Cross-border Foreign Exchange Payment Business of Payment Institutions” (referred to as the “Guiding Opinions”) attempts to delineate a clearer role for them, since third-party payment institutions are not financial institutions in the traditional sense, they are not required to implement foreign exchange management. Functions often encounter the problem of ambiguous positioning. This ambiguity not only brings certain difficulties to supervision, but may also cause third-party payment institutions to face legal uncertainty when performing their foreign exchange management responsibilities.

Secondly, the traditional foreign exchange management system faces many challenges. On the one hand, because third-party payment institutions are involved in cross-border payments, a large amount of funds are stranded within these institutions, which poses an obstacle to accurate statistics of foreign exchange flows by international organizations. On the other hand, since cross-border payments mainly rely on digital information rather than paper documents, it also makes it difficult for regulators to effectively verify the authenticity of each transaction.

In addition, the state has adjusted its foreign exchange management policies and relaxed the limit requirements for cross-border payments, aiming to better adapt to the small-amount and large-volume characteristics of cross-border e-commerce. According to the latest regulations, whether it is trade in goods or services, the upper limit for a single transaction is US$50,000. This move will help meet the transaction needs of some high-value commodities such as robots and drones. However, this may also provide convenient conditions for some companies trying to circumvent supervision, so regulators need to pay close attention to possible violations.

In recent years, regulatory authorities have increased their supervision of third-party payment institutions, especially those that violate foreign exchange management regulations, such as providing services for illegal online foreign exchange speculation platforms, fictitious transactions and assisting customers in illegal cross-border transfers of funds, etc. . According to statistics, since 2018, the People’s Bank of China and the State Administration of Foreign Exchange have imposed high fines on a number of illegal institutions, up to more than 46 million yuan. At the same time, the “China Foreign Exchange” magazine published an article emphasizing that the regulation of the development of foreign exchange business of payment institutions will be further strengthened.

To sum up, although third-party payment institutions have greatly promoted the development of cross-border trade, while enjoying the convenience they bring, they should also pay attention to a series of legal and regulatory issues caused by it. In the future, how to balance the relationship between innovation and compliance will be an important issue that must be faced for the sustained and healthy development of this industry.