The payments industry may be facing its most heavily regulated year yet.
The outsourcing market is under strict rectification, "copying" transactions are classified as illegal, and huge anti-money laundering fines are frequently issued… Some payment institutions on the high-voltage line are conducting self-examination and rectification, some have paid for compliance issues, and some have withdrawn from the market in the process of survival of the fittest.
But despite this, the market chaos is still not over. A recent investigation by a reporter from Beijing Business Daily found that despite repeated strict regulatory crackdowns, many new methods of online sales of POS machines have emerged in the market. In major e-commerce platforms, a variety of POS machines are linked to products. By avoiding sensitive words, they use homophones or related words such as "broken driver", broken driver's card, card consumption machine, personal card reader, scan code payment box, etc. to avoid crackdowns. Judging from the search results, there have been several Hundreds of POS machine products have flowed into the pockets of individual consumers through online sales. Judging from the sales of 200+ and 100+ for a single product, there is still a long way to go to completely rectify this cat-and-mouse game of illegal online sales, and it requires the joint efforts of payment institutions, platforms, supervision and other parties.
Online sales of POS machines are booming
As early as many years ago, supervision had explicitly prohibited online sales of POS machines, and many payment institutions also issued warnings. However, up to now, the chaos of online sales of POS machines has still not been "misfired", and even purchasing on major e-commerce platforms is not difficult.
For example, on the Taobao platform, a reporter from Beijing Business Daily searched for the keyword "POS machine" and it showed "No related products found." However, under the search, related words and products such as "portable card swiping machine", "portable card swiping machine", "small PO machine", "card charging and swiping machine" were listed. If you randomly click on one, the product link of the POS machine is displayed.
In addition, Beijing Business Daily reporters used keywords such as the homophonic word "broken driver", as well as "card swiping machine" and "personal card swiping machine". It can also be seen that different types of POS machines are on sale at multiple payment institutions, with hundreds of product links, and the sales of the top recommended POS machines are as high as 200+ and 100+. According to the sales pages displayed by some merchants, they claim that "it can be processed by individuals or merchants, supports various systems, and can be swiped 1 million times without damaging the card."
A Beijing Business Daily reporter randomly selected a store called "Karaka Central China Service Center" for consultation on the grounds of purchase. The store's customer service told them that they were an agent for Lakara (300773) POS machines and sold the latest all-in-one card swiping and code scanning machines. The card swiping rate was 0.58%, and the QR code scanning rate was 0.38%, and the payment was received in seconds. The machine price is 18 yuan, and a traffic fee of 45 yuan per year is required. According to the customer service representative, when placing an order on Taobao, the after-sales process will be completed by staff adding WeChat.
During the conversation on the Taobao platform, the customer service staff were very cautious in their words and techniques. For example, a space or a slash will be added between the two words "swipe card", or it will be written as "唰"; "add WeChat" will be expressed as "十Vxin"; a comma will also be inserted between the three letters of POS. From the perspective of the industry, similar methods of splitting and changing words may be to avoid triggering the word blocking mechanism of the platform.
And this is not an isolated case. A Beijing Business Daily reporter noticed that another Taobao store called "National Processing Center No. 5 Store" is also selling Lakala's POS machines. The price and rate of the machines are the same as the previous one, but the handling method is more cautious. At the beginning of the consultation, the customer service said that it was inconvenient to answer questions on Taobao, and asked to use WeChat to send product descriptions and usage videos. He also said frankly that "there are some sensitive words that cannot be posted on the Taobao platform, but as long as the sensitive words are not involved, other transactions will be fine."
A reporter from Beijing Business Daily then placed an order for a POS machine at the "National Processing Center Store No. 5". However, when the payment was about to be made, the system displayed "The seller's payment is restricted. Please contact the seller for processing or try again later." Immediately, the customer service provided the reporter with a link to another store. The store name consisted of a string of unordered English letters. The monthly sales volume of the product was small. The reporter successfully completed the order for the product in this store.
In fact, many e-commerce giants currently sell POS machines. In another e-commerce platform that focuses on low prices, similar to Taobao, by searching for "pro machine, credit card, po machine processing, BOS machine", etc., the product introduction will be packaged as a scan code payment box, a home handheld cash register all-in-one machine, etc. In addition, although the product is not directly displayed when searching for POS machines, there will be a series of "search discovery" keyword recommendations on the search page. Once a product is browsed, multiple similar product recommendations will appear on the homepage.
For example, a "Mingguang Digital Technology (300079) Service" store introduced that it is an agent for Jialian payment machines, with a card payment rate of 0.55%, which can be used immediately after registration without any additional fees. The store even said that there are no risks in selling and purchasing POS machines on e-commerce platforms. The purchased POS machines can be used by individuals to swipe their credit cards, raise card balances, and cash out. The store’s POS machine’s “group discount price” is 13.52 yuan.
In addition, on the well-known short video e-commerce platform, a dazzling array of POS machine sales information can also be easily obtained through keywords such as card swiping machines, POS cash registers, and personal card swiping machines. In the product introduction, the word "POS machine" is not even blocked. Many stores attract customers with "regular POS, 0.38 seconds to arrive" and "personal credit card, 2023 new model, no deposit". The prices of the machines range from 0.5 yuan to 70 yuan.
"We have more than 20 offline physical stores and have been in business for seven years." "The main thing we do is after-sales service. I believe you will find it worthwhile as long as you use it." Among them, a store owner who calls himself an agent of Yinsheng POS machines said. According to the business license provided to the Beijing Business Daily reporter, the agent's name is "Zhou Laizhou Electronics Store, Wuhua District, Kunming City" and operates the sales of power electronic components. When asked whether there was a risk of violation when trading on the e-commerce platform, the customer service officer responded, "Strict supervision in terms of policy only applies to credit cards. There is no need to worry about security. The source of each fund can be queried. In fact, how customers use the card is the key. Credit card swiping is about methods. Based on our many years of experience, customers will never be risk-controlled as long as they follow the method."
Organizations respond in unison
In fact, the behavior of selling POS machines on e-commerce platforms has already touched the red line of the industry.
As early as 2016, the central bank issued the "Notice on Matters Concerning Strengthening Payment and Settlement Management to Prevent New Illegal Crimes in Telecom Networks", requiring payment institutions to strictly review the qualifications of special merchants and standardize the management of acceptance terminals. No unit or individual is allowed to buy or sell POS machines (including MPOS), card readers and other acceptance terminals online.
There are also many risks involved in selling POS machines through the Internet. As Su Xiaorui, a senior consultant in the financial industry analyzed by Analysys, said, the online sales of POS machines by e-commerce platforms has lowered the threshold for using POS machines and increased the possibility of illegal use of POS machines. For example, online sales of POS machines have lax requirements for merchant qualifications and low thresholds, and POS machines may be used illegally by illegal elements. Profit; In addition, online sales of POS machines are often accompanied by illegal cash-out, and even involve illegal and criminal activities such as theft and money laundering; in addition, organizations expand sales through "tolerance" of online sales of POS machines, which is also a manifestation of disrupting the order of the industry. For other entities operating in compliance, it can be said that "bad money drives out good money."
In response to the aforementioned online sales issues, reporters from the Beijing Business Daily also conducted interviews with the corresponding payment companies. However, judging from the responses from many institutions, they all stated that they were not aware of the online sales of their products and that violations had been rectified.
Among them, the relevant person in charge of Jialian Payment responded to the Beijing Business Daily reporter that Jialian Pay attached great importance to the sale of POS terminals by the store "Mingguang Digital Technology Service" on the e-commerce platform and immediately contacted the store for verification. According to the store name and business license information published by the store, it was not on the list of outsourcers cooperated by Jialian Payment, and after contacting the store, the latter also failed to provide relevant credentials for cooperation with Jialian Payment.
In response to the store's illegal online sales of POS terminals, Jialian Payment has reported to the e-commerce platform. Currently, the store has removed the POS sales information.
Lakala claimed that the company does not sell POS machines online and has never authorized or allowed in any form outsourcing service agencies to sell POS machines online.
"Our company strictly conducts business in accordance with the red line of prohibiting online sales of POS machines. We regularly send letters to outsourcing service agencies regarding the prohibition of online sales acceptance terminals and market behavior restrictions, clarifying the company's position and emphasizing the consequences of violations. At the same time, we organize all outsourcing service agencies Sign a letter of commitment and promise not to engage in illegal propaganda and other behaviors; arrange for dedicated personnel to supervise and investigate outsourcing service agencies, monitor major e-commerce platforms and Internet advertising platforms, and immediately send a lawyer's letter to them if illegal propaganda is discovered, requiring them to be closed and removed from the shelves," Lakala responded.
The relevant person in charge of Yinsheng Payment stated that the company is not aware of the situation of service providers selling POS machines through the Internet, and strictly prohibits outsourcers from selling POS machines online, and will verify whether the investigation is true as soon as possible and take relevant measures. It was found that "Zhoulaizhouwang Electronic Store, Wuhua District, Kunming City" is a non-company cooperative outsourcing service provider. After querying the acquisition outsourcing service agency registration system of the China Payment and Clearing Association, the outsourcing service provider has not yet completed the registration.
The organization has repeatedly emphasized this, but why are online sales still prohibited? From the perspective of the industry, behind the violations there are still individuals or merchants who take risks for the sake of profit and exploit the loopholes of the institution. At the same time, payment institutions also have management loopholes.
At present, POS machine sellers on the Internet platform are mainly individuals, selling in a marginal way, which is characterized by "one shot and one place". Yu Baicheng, chief researcher of Houxue Research, pointed out that this method will cause difficulties for payment institutions in the management of special merchants. Some individuals may even use the name of the payment institution's brand POS machine, which may actually be counterfeit, which in turn infringes on the interests of the payment institution. However, since online sales of POS machines have been deemed illegal by supervision, online platforms, payment institutions and outsourcers are all responsible for managing illegal online sales.
"The main reason behind this is that there is market space, and at the same time, payment institutions have loopholes in the management of their agents." Wang Pengbo, chief analyst of Broadcom Consulting's financial industry, further said that the corresponding payment institutions must bear management responsibilities and should strengthen risk management and control of merchants recommended by outsourcing institutions through monitoring and inspection and other means. At the same time, outsourcing institutions are not allowed to market POS machines to individuals with no business activities, nor are they allowed to forge merchant application materials or recommend false merchants to the network.
"For acquiring institutions, firstly, they should establish compliance awareness, self-examine and self-correct the existing sales process, and improve internal management; secondly, they should strengthen the management and risk prevention of external agents." Su Xiaorui said.
"The institution is undoubtedly responsible. If you fail to manage the outsourcing service provider, this is a problem." In response to this phenomenon, a supervisor close to the Beijing Business Daily reporter also stated, "The reason why this gray and black industrial chain is so difficult to cure is indeed because of the institutions and even individuals behind it. Everyone has their own interest demands, and as demand arises, new ones are eliminated, so it is difficult to monitor and rectify them in a timely manner. But I believe that by strengthening the rectification of arbitrage and rectifying the root causes, a series of derivative chaos such as online sales will also be eliminated. "
Urgent rectification of the platform
The chaos of online sales of POS machines has returned with a vengeance. According to the industry, the e-commerce platform is also responsible.
As Wang Pengbo pointed out, "Online merchants selling POS machines are mixed, and the quality and service of POS machines are difficult to guarantee, and consumers are easy to fall into traps. Online sales of POS machines have long been banned, and now it has reappeared that agents under payment institutions are committing crimes against the trend, and it also reflects that e-commerce platforms are not strict in auditing."
However, many platforms have also been quick to rectify merchants.
In response to the chaotic online sales, on July 11, Beijing Business Daily reporters also conducted interviews with relevant e-commerce platforms. Taobao responded that according to the "Taobao Platform Prohibited Information Management Rules", the platform prohibits the sale of POS machines and other products or related services that can only be provided by specific financial institutions. The platform controls the above-mentioned behaviors through various means such as technical means and daily inspections. However, the means used by individual merchants to circumvent platform control are increasingly diversified and hidden, such as using variant words, deformed words, etc. to avoid control. According to clues provided by reporters, the platform has controlled relevant products and added relevant search blocking words.
In addition, the person in charge of the above-mentioned short video platform responded to a Beijing Business Daily reporter that the platform banned the sale of POS machines in accordance with the law, and had clear control rules, and would be severely punished if discovered. In response to the situation where some merchants use descriptions such as "card swiping machines" and "consumption machines" to circumvent rules and conduct illegal sales, the platform has upgraded and iterated related technologies and strategies. At the same time, the platform has further improved monitoring coverage and granularity, and strengthened targeted management and control of new violation scenarios such as variant words and variant descriptions.
As of press time, two Taobao stores and a short video platform e-commerce store that Beijing Business Daily reporters consulted have either removed the products from the shelves or displayed "the store does not exist." When searching for "POS machine" or "cash out" again on the above-mentioned short video platform, a prompt will pop up on the page: "Please do not use POS machines for illegal cash out and other activities."
At the same time, the customer service staff of the POS machine where the reporter had previously placed an order on Taobao actively sought to apply for a return, and changed his statement that Lakala products were not sold. When the reporter went to the order page to check, the express delivery showed that it was being returned, the product no longer existed, and the product displayed in the store was replaced by a pair of women's shorts.
According to Article 23 of the E-Commerce Law, the goods sold or services provided by e-commerce operators shall meet the requirements for ensuring personal and property safety and environmental protection requirements, and shall not sell or provide goods or services that are prohibited from trading by laws and administrative regulations. Li Ya, a partner at Beijing Zhongwen Law Firm, told reporters that online sales of POS machines have been banned by regulatory requirements, and platforms should fulfill their obligations as e-commerce platform operators to regulate the market and remove corresponding products from the shelves.
"For social media platforms, they should cooperate with regulatory requirements and adopt certain technical means to screen for online sales of POS machines. For those that are large in number and difficult to identify, a corresponding reporting system can be established." Su Xiaorui further said.
Yu Baicheng also said that online platforms should strengthen the review of illegal products and merchants, and use artificial intelligence technology to identify risks in pictures, texts, transaction records, etc. for borderline sales, so as not to give room for illegal sales; payment institutions and outsourcers should strengthen audit management and risk education. On the other hand, online platforms should be specially monitored, and violations should be reported when violations are discovered, and multiple parties should work together to maintain a reasonable order in the market.
The strictest supervision is coming
Electronic sales and online POS machines, illegal publicity, and lax risk control by merchants have been long-standing chronic problems in the acquiring market.
It is worth mentioning that since the central bank in 2016 required any unit or individual not to buy or sell POS machines, card readers and other acceptance terminals online, the regulatory situation has been tightening. For example, the control over third-party payments is becoming increasingly tight, and the severity of crackdowns on violations of regulations and illegal operations continues to increase. In Wang Pengbo’s view, the industry must develop in a formalized manner in the future, and supervision will become increasingly strict.
This year, payment institutions may also usher in the most stringent regulatory year. The aforementioned source close to the regulator revealed, "Currently, arbitrage transactions have been classified as illegal. Serious violations are crimes, and supervision will severely punish such violations. After the second half of the year, the supervision situation for such behavior will be more stringent, and the entire rectification and governance process will be promoted step by step."
From the perspective of the industry, to restore "clear" space for POS machine sales and completely rectify the chaos of POS machines, network platforms, payment institutions and outsourcing service providers need to make reasonable progress.
As Yu Baicheng pointed out, online platforms must strengthen the review of illegal products and merchants. For "edge-passing" sales behavior, artificial intelligence technology can be used to identify risks in pictures, text, transaction records, etc., and do not give room for illegal sales behavior; payment institutions and outsourcers must strengthen audit management and risk education. On the other hand, online platforms must be specially monitored, and violations must be reported immediately, and multiple parties must work together to maintain a reasonable order in the market.
"Relevant regulations on online sales of POS machines have been revised and improved over the years and are relatively comprehensive in content. Therefore, compared with the content of the system, it is recommended to focus more on the implementation level." Su Xiaorui said that focusing on the implementation of supervision, we must first increase the management of acquiring institutions; secondly, strengthen on-site inspections such as the real-name system for merchants; finally, establish a relevant complaint and reporting system.
Li Ya also said that the follow-up trend should still be stricter supervision, and the significance and value of POS machines should be reorganized to return payment and receipt to its roots. At the same time, compliance rectification should be carried out in conjunction with regulatory policies and self-regulatory standards, the responsibilities of acquiring institutions and outsourcing institutions should be consolidated, rectification work standards should be clarified, and punishments should be intensified for non-compliant institutions. Acquiring market entities that violate regulations and laws should be given due penalties. If acquiring market entities are found to be involved in illegal crimes, they should be transferred to the public security organs in a timely manner.
Beijing Business Daily Financial Investigation Team
