The regulatory crackdown that has shaken up China’s fintech industry since late 2020 appears to be coming to a close with the imposition of hefty fines on the country’s two digital payments giants.
Tencent, along with its payments subsidiary Tenpay, has been fined approximately 2.99 billion yuan ($410 million) by the People’s Bank of China for “its past regulatory breaches in relation to the provision of payment services in the mainland of China,” the company said in a filing on Friday.
On the same day, the central bank announced it will slap a 7.123 billion yuan (roughly $1 billion) fine on Ant Group, the fintech affiliate of Alibaba, for a range of illegal activities, including those concerning corporate governance, consumer protection, banking and insurance, payments and settlement, anti-money laundering practices and fund sales.
Together, Alibaba and Tencent enjoy a duopoly in China’s digital payments market, along with a range of other financial services that are offered through their respective payment platforms.
China’s clampdown on fintech is part of its larger efforts to rein in the expanding power of its tech sector and subject it to more regulatory scrutiny in fast-emerging fields. In late 2020, China called off Ant’s initial public offering, which would have become the largest IPO in history up to that point.
Since then, Ant has undergone a major restructuring that has significantly curtailed the company’s overall influence on consumer finance. Jack Ma has reportedly given up his control of the fintech empire, and importantly, Ant’s main offerings are now subject to regulations that normally target traditional financial services.
At least in the fintech sector, China’s tech clampdown seems to be reaching a conclusion, as indicated by the central bank in a statement:
“Currently, most of the prominent problems in the financial business of platform enterprises have been corrected. The focus of the financial regulators has shifted from collectively rectifying the fintech businesses of tech platforms to business-as-usual supervision.”
The series of regulatory crackdowns across China’s tech industry has dampened investor and business confidence over the past three years. A clear end to the corrective actions in fintech could inject new energy into the industry and reignite interest in investments. As for the fine, Tencent had this to say:
“The Company believes the financial regulators will focus on normalised regulation going forward, implementing financial policies and measures to promote the healthy development of the platform economy, and supporting and encouraging platform companies to continue their efforts in financial inclusion.”