Lately, the payment and settlement department of the People’s Bank of China (PBOC) issued the Notice on Work Concerning Cancellation of Renminbi Customer Reserve Accounts of Payment Institutions, which requires third-party payment institutions to cancel their renminbi customer reserve accounts by 14 January 2019. This will bring the time that payment institutions benefit from customer reserves to an end on the said day.
Partner
Jingtian & Gongcheng
For the purpose of the notice, “customer reserves” are monetary funds actually received, as advance payments that will be used for final payments, by payment institutions for the purpose of processing payment transactions entrusted by customers.
A third-party payment transaction consists of two non-simultaneous steps. First, the customer originates the entrusted payment transaction and delivers the payment amount to the payment institution. Second, the payment institution forwards the amount to the payee. Evidently, there’s a time lag between these two steps. During this time lag, the sum is deposited in the reserve account held in the name of the payment institution and accrues interest income at a certain rate.
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Wu Jiejiang is a partner at Jingtian & Gongcheng
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