China fines Caifutong, Tencent’s WeChat Pay operator, for breaking foreign exchange rules

Tenpay, also known as Caifutong, was fined 2.8 million yuan for violating foreign exchange regulations, according to SAFE, the nation’s forex gatekeeper
The WeChat Pay operator was also reprimanded in late 2020 and mid-2018 for various breaches related to cross-border currency transactions

Tencent

Jane Zhang

Published: 4:53pm, 28 Nov 2021

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China has fined Tenpay, an online-payment unit of Tencent Holdings, 2.8 million yuan (US$438,000) for violating foreign exchange rules amid growing regulatory scrutiny of the nation’s fintech industry.

The unit received warnings last week and was also ordered to rectify its failure to submit relevant materials and for carrying out foreign exchange business beyond the scope of its business registration, according to a statement published by the State Administration of Foreign Exchange (SAFE) branch in Shenzhen.

The latest action represents at least the third reprimand since mid-2018 for the Tencent unit also known as Caifutong, which operates the group’s WeChat Pay system. Together with Ant Group’s Alipay, they dominate more than 90 per cent of the mainland mobile payments market.

“The company has made an improvement plan and the necessary rectifications have been completed,” Tenpay said in a statement on Sunday. “We will further strengthen compliance management under the guidance of the Shenzhen branch of SAFE in future.”

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The penalty came amid a growing list of malpractices highlighted by authorities in their ongoing crackdown on Big Tech. The government this month meted fines to firms including Alibaba Group Holding, Tencent, and Baidu for not disclosing deals going back for years, on top of major crackdowns on monopoly practices and data privacy.

The People’s Bank of China (PBOC) will “deepen” its antitrust investigations into the nation’s mobile payments sector, which has been dominated by a few private financial technology firms, deputy governor Fan Yifei said in September.

Mobile payments are one of the most visible parts in China’s fast-growing digital economy. Alipay, WeChat Pay and peers processed US$5.4 trillion worth of transactions in 2020, a 9.6 per cent increase over 2019, making China the second largest market after the US.

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They represented part of the volume handled by the wider non-banking payment agencies worth 294.6 trillion yuan (US$45.6 trillion) last year, a 17.9 per cent jump over 2019. The number of transactions rose 14.9 per cent to 827.3 trillion over the same period.

Chinese authorities also issued an 8.8 million yuan administrative penalty against Tenpay in December last year for “irregularities” including providing payment services for illegal and false transactions and poor record-keeping, the central bank’s Shenzhen branch said.

Tenpay and Alipay were also both fined 600,000 yuan by SAFE in July 2018. The duo, together with 25 companies and other individuals, were found guilty of breaking the rules on foreign-exchange transactions.