China’s financial regulators have demanded that 13 tech companies distinguish financial services from the overall service range into separate areas.

Frank Media reports that the regulator presented the new requirements at the meeting with tech companies in late April. It was attended by the management of the People’s Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, and China's State Administration Of Foreign Exchange. On the business side, it was attended by representatives from Tencent, ByteDance, Baidu, JD.Com, Meituan and Didi.

Beijing is pushing for more control over online platforms. Companies are expected to distinguish financial departments into separate holding companies, each of which will report to the corresponding regulator.

The financial authorities insist on breaking the “inappropriate ties” between the tech companies’ payment services and the financial services that provide loans to the population. Earlier, regulators made similar demands to Jack Ma’s Ant Group. Experts point out that this will lead to a decrease in profits, as the platform will have to remove links to lending services from payment apps.

By putting pressure on large fintech companies, regulators are encouraging small companies to lend to the population at higher rates. According to the Financial Times, Ant offered loans at 18%, and now more than a dozen platforms have an annual rate of 25-35%. For example, Chinese firm Jiedai Dawang’s rates have reached up to 36% per year. High rates raise the likelihood of defaults, warns Bo Zhuang, an economist at London-based consulting firm TS Lombard.

Now, tech companies will have to increase their capital to meet the consumer protection requirements - it must cover 30% of the loans that banks offer jointly with the platforms, says the Financial Times.

Regulators are also pushing for breaking the information monopoly of tech companies. They will have to provide data on consumer loans to the agencies controlled by the People’s Bank of China.

Representatives of the companies attending the meeting have assured the regulator they will “focus very carefully on self-monitoring and correcting mistakes,” the regulator said in a statement.

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