Recent developments within China’s payments sector indicate a potential shift in the dominance currently held by Ant Group and Tencent.

After the unexpected suspension of Ant’s initial public offering and a governmental directive for the company to restructure its operations, Chinese regulators this week communicated further intentions to address market concentration within the rapidly expanding digital payments landscape.

The proposed regulations, intended to govern non-bank payment processing and released by the People’s Bank of China (PBOC) this week, stipulate that any non-bank payments processor controlling more than one-third of the non-bank payments market, or two companies collectively holding half of the market, may receive regulatory cautions from the anti-monopoly authority operating under the State Council.

Simultaneously, a single non-bank payments provider with over half of the digital payments market, or two companies with a combined two-thirds share, could be subject to investigation regarding potential monopolistic practices.

A subtle distinction exists between these two rules, as the latter focuses specifically on digital payments, unlike the first which concerns non-bank payments .

Additionally, the regulations do not detail the methodology authorities will employ to determine an organization’s market share, such as whether it will be based on total transaction value, the number of transactions processed, or other relevant metrics.

According to research from iResearch, Alipay facilitated over half of China’s third-party payment transactions in the first quarter of 2020, while Tencent processed close to 40% of payments during the same timeframe.

As China increases its oversight of its major payments companies, it is also creating opportunities for international firms to enter the financial market. In December, Goldman Sachs finalized the acquisition of full ownership of its Chinese joint venture. This month, PayPal became the first fully foreign-owned payments business in China, following its purchase of the remaining stake in its local partner, Guofubao.

Industry analysts have conveyed to TechCrunch that PayPal is unlikely to directly challenge the established domestic payments leaders, but may instead concentrate on opportunities within the cross-border payments sector, a market that already includes prominent companies such as XTransfer, founded by former Ant Group employees.

Ant and Tencent also encounter competition from other Chinese internet companies. A range of businesses, including food delivery service Meituan, e-commerce platforms Pinduoduo and JD.com, and ByteDance, the parent company of TikTok, have all launched their own digital wallets, though none currently present a significant threat to Alipay or WeChat Pay.

The extensive proposal from the PBOC also outlines requirements for how payments processors manage customer data. Non-bank payment services are required to store specific user information and transaction records, and to cooperate with authorities during data audits. Companies must also secure user consent and clearly explain data collection and usage practices, reflecting China’s broader efforts to regulate data handling procedures.