The People’s Bank of China, the country’s central bank, has required all banks and third-party payment institutions to connect to a unified platform by June 30 of 2018 to ensure effective regulation and transaction security, Nanfang Metropolis Daily newspaper reported Saturday.

Currently, the online payment via the third-party payment tools, such as Ant Finance’s Alipay and Tencent’s WeChat Pay, are conducted directly between the payment tools and banks, bypassing the central bank’s clearing system. 

However, according to a document the central bank released Friday, all banks and third-party payment institutions in China, must complete preparation of connecting to the unified platform Nets Union Clearing Corporation (NUCC) before October 15, 2017 and all online payment involved bank accounts will be carried out on the NUCC since June 30, 2018, the report said. 

China has the largest third-party payment users and transaction volume in the world while the central bank could not have detailed transaction information and capital flow due to the direct payment tools-bank connection which can be taken advantages in money laundry, credit cards cashing out and illicit money transferring.  

A man walks past the People's Bank of China in Beijing. / AFP Photo

Setting up the NUCC is to fix these loopholes and also reduce transaction risks by putting online capital flow under regulation, Guo Tianyong, a professor of Central University of Finance and Economics, was quoted as saying by Beijing Daily newspaper. 

Users of the third-party payment tools will benefit from the NUCC because the unified platform will reduce clearing cost and eventually cut transaction cost, said Wang Pengbo, an analyst from Internet research firm Analysys, according to Nanfang report. 

Considering the online transaction volume at peak hours can be as high as 100,000 deals per second, the NUCC will be under huge pressure in terms of system performance, said Xue Hongyan, director of Suning Finance Research Center, the report said. 

The NUCC was jointly founded by 45 shareholders, including 38 payment institutions. The central bank has more than 30% shares as the largest shareholder.