Cross-Border Payments: A New Blue Ocean, but What Growing Pains Lie Ahead? (AI Translation)
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文｜财新周刊 张宇哲 丁锋
By Caixin Weekly Zhang Yuzhe and Ding Feng
跨境电商等外贸新业态如火如荼，其背后的跨境支付行业也被注入一剂“强心针”。
The burgeoning cross-border e-commerce and other new forms of foreign trade have injected a significant boost into the cross-border payment industry.
2024年6月12日，商务部、国家发展改革委、中国人民银行等九部委联合发布的《关于拓展跨境电商出口推进海外仓建设的意见》指出，“支持符合条件的银行和非银行支付机构按规定凭交易电子信息，为跨境电商企业提供高效、低成本的跨境资金结算服务”，延续了近几年支持跨境电商和跨境支付的政策基调。
On June 12, 2024, the Ministry of Commerce, the National Development and Reform Commission, the People's Bank of China, along with six other departments, jointly issued the "Opinions on Expanding Cross-Border E-Commerce Exports and Promoting the Construction of Overseas Warehouses." The document states, "Support qualified banks and non-bank payment institutions to provide efficient and low-cost cross-border fund settlement services for cross-border e-commerce enterprises based on transaction electronic information, in accordance with regulations." This continues the policy trend of supporting cross-border e-commerce and cross-border payments observed in recent years.
过去五年，中国跨境电商进出口额快速增长。2023年，中国跨境电商进出口总额2.38万亿元，同比增长15.6%，较2018年的1.06万亿元增长逾120%。值得关注的是，过去五年的跨境电商进出口额增长，主要来自出口额的增长，进口额基本稳定在每年5000亿元左右，出口额则增长近200%。2024年一季度，跨境电商进出口额5776亿元，同比增长9.6%，其中出口额4480亿元，同比增14%。
Over the past five years, China’s cross-border e-commerce import and export volume has seen rapid growth. In 2023, the total import and export volume of China's cross-border e-commerce reached 2.38 trillion yuan, marking a 15.6% increase from the previous year and an over 120% increase compared to 1.06 trillion yuan in 2018. Notably, the growth in cross-border e-commerce over the past five years has been primarily driven by an increase in export volume, while import volume has remained relatively steady at around 500 billion yuan annually. Export volume, on the other hand, has surged nearly 200%. In the first quarter of 2024, the cross-border e-commerce import and export volume was 577.6 billion yuan, a 9.6% year-over-year increase, with export volume reaching 448 billion yuan, a 14% year-over-year increase.
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- China’s cross-border e-commerce has increased significantly, with a 15.6% rise in 2023 to 2.38 trillion yuan, driving the cross-border payment industry.
- Government support is growing, issuing "Opinions" to promote efficient and low-cost cross-border fund settlement services.
- Rapid expansion and transformation in the payment landscape include significant participation from non-bank payment institutions and ongoing regulatory efforts on licensing and compliance.
China's cross-border e-commerce and new foreign trade forms have significantly boosted the cross-border payment industry [para. 1]. On June 12, 2024, multiple Chinese governmental departments issued the "Opinions on Expanding Cross-Border E-Commerce Exports and Promoting the Construction of Overseas Warehouses," calling for support from banks and non-bank payment institutions in providing cost-effective cross-border fund settlement services [para. 2]. This policy supports the trend over the past five years, with China's cross-border e-commerce volume growing from 1.06 trillion yuan in 2018 to 2.38 trillion yuan in 2023 [para. 3].
Non-bank payment institutions are becoming prominent players in cross-border payments, benefiting from their close connections with cross-border e-commerce [para. 6]. Companies like Ant Group's Alipay+ and Tencent's Tenpay, among others, are rapidly expanding and acquiring necessary licenses for cross-border payment services [para. 7]. Foreign platforms like PayPal and Airwallex are also entering the Chinese market through joint ventures or acquisitions [para. 9].
The "Payment Regulations" implemented from May 1, 2024, mandates that cross-border payment services must have a license, helping to combat unlicensed operations and improve regulatory oversight [para. 10]. Non-bank payment institutions are now a significant option for cross-border e-commerce and consumers, given their advantages in efficiency, speed, and cost compared to traditional bank payments [para. 20].
Despite these advantages, the cross-border payment industry faces challenges like intense competition and profitability issues [para. 21]. PingPong and Lianlian Pay, significant players in the market, have seen varying financial results, with Lianlian Digital reporting substantial net losses despite increasing revenues [para. 23].
Regulatory measures have shifted since the early approval of Alipay and Tenpay's cross-border services. In 2015, the market was opened to 269 payment institutions, driving rapid growth [para. 26]. As demand for cross-border payments grows, foreign institutions like PayPal and Thunes, among others, are actively obtaining payment licenses [para. 28]. PingPong secured a domestic payment license through acquisition, reflecting the industry's race to adapt to regulatory requirements [para. 30].
Unlicensed operations faced increased scrutiny following the State Administration of Foreign Exchange's "Document No. 13" in 2019, reinforcing that only registered institutions could offer cross-border services [para. 32]. Despite regulatory tightening, issues like untransparent transaction information and multiple intermediary points pose risks [para. 42]. The "cutting off direct connections" initiative is being explored to standardize cross-border payment processes, ensuring compliance and mitigating risks [para. 44].
The landscape, categorized by service targets, sees Alipay+ and Tenpay deeply invested in consumer payments, while PingPong, Lianlian Pay, and Airwallex focus on B2B transactions [para. 20]. The regulatory focus includes enhancing Know Your Customer (KYC) measures, anti-money laundering efforts, and data security, despite the industry's complexities needing nuanced approaches [para. 51].
The global perspective on cross-border payments highlights both wholesale and retail categories, with an increasing emphasis on retail payments driven by e-commerce [para. 57]. Various QR code payment standards illustrate the fragmented technological landscape, with major payment giants like Alipay and Tenpay still needing to align with international standards [para. 117].
Looking forward, industry experts suggest focusing on achieving a unified QR code payment standard to enhance interoperability and market efficiency [para. 118]. Overall, while cross-border payments offer significant opportunities, navigating regulatory challenges and aligning with global standards remains critical for sustainable growth [para. 124].
- Ant Group
蚂蚁集团 - Ant Group, a payment giant in China, actively engages in the cross-border payment sector through its platform Alipay+. It focuses on obtaining payment licenses in overseas markets such as Southeast Asia, the Middle East, Africa, Europe, and Japan, reflecting its strategic expansion to support efficient and low-cost cross-border settlements for e-commerce businesses.
- Tencent
腾讯 - Tencent's non-bank payment subsidiary, Tenpay (operating as WeChat Pay), is actively expanding its cross-border payment services. It is competing in the global market with platforms like Alipay+, focusing on Southeast Asia, the Middle East, and other international regions. WeChat Pay targets the consumer market, aiming to provide efficient and cost-effective cross-border payment solutions for personal transactions.
- Lakala
拉卡拉 - Lakala, a Chinese third-party payment platform, is actively expanding its presence in the cross-border payment sector. It is obtaining payment licenses in regions like Southeast Asia, Middle East, Africa, Europe, and Japan to facilitate cross-border transactions, especially in the burgeoning cross-border e-commerce market.
- SuiXingPay
随行付 - SuiXingPay, possessing a third-party payment license in China, is actively expanding its presence in the cross-border payment sector, focusing on Southeast Asia, the Middle East, Africa, Europe, and Japan. This expansion involves establishing acquiring and other payment licenses in these overseas markets.
- UMF
联动优势 - According to the article, the Universal Merchant Bank (UMF) was not explicitly mentioned. The article primarily focuses on the growth of cross-border e-commerce and the accompanying cross-border payment industry trends in China. However, it discusses various entities like Alipay, PayPal, and other Chinese and foreign payment institutions involved in cross-border transactions, regulation, and compliance.
- Goton Express
国通星驿 - Goton Express (国通星驿) is one of the many Chinese non-bank payment institutions actively expanding in cross-border payments. The company holds a third-party payment license and is focusing on Southeast Asia, the Middle East, Africa, Europe, the U.S., and Japan markets. This growth aligns with China's policy to support cross-border e-commerce and promote efficient, low-cost cross-border funds settlement services.
- Joinpay
嘉联支付 - The article does not provide specific information about Joinpay. It mainly discusses the rapid growth of China's cross-border e-commerce and the corresponding expansion of the cross-border payment industry, detailing various players and regulatory aspects.
- ChinaPnR
汇付天下 - The article does not explicitly mention ChinaPnR (China Payment and Remittance). However, it focuses on the rapid growth of cross-border e-commerce and the associated cross-border payment industry, highlighting key players like Alipay, WeChat Pay, PingPong, and others, emphasizing regulatory requirements and the evolving landscape for payment solutions in China.
- YeePay
移卡 - The article mentions YeePay (移卡) as one of the non-bank payment institutions actively expanding in cross-border payment markets. YeePay is among several Chinese payment firms securing overseas licenses in regions such as Southeast Asia, the Middle East, Africa, Europe, and Japan to support the booming cross-border e-commerce and payment sectors.
- Lianlian Digital
连连数字 - Lianlian Digital, the parent company of Lianlian Pay, has seen financial challenges. Despite increasing global payment income to 63.8% of its total revenue and annual revenues rising from 5.93 billion RMB in 2020 to 10.28 billion RMB in 2023, the company reported cumulative net losses of 20.33 billion RMB over three years and a net loss of 6.54 billion RMB in 2023.
- PingPong
PingPong - PingPong is a China-based cross-border payment service company that entered the industry to lower the fee rates for merchants. The company acquired its payment license through the acquisition of Zhejiang Aerospace Electronic Information Co., Ltd. PingPong’s primary focus is on B2B business, unlike consumer-focused competitors like Alipay.
- PayPal
PayPal - PayPal, through its full subsidiary, obtained a payment license in China by acquiring Guofubao Information Technology Co., Ltd. (now PayPal Payments) in September 2019. This acquisition was part of PayPal's strategy to meet regulatory requirements and expand its cross-border payment services in China, consistent with the 2019 mandate that foreign entities must acquire local payment licenses to operate.
- Airwallex
空中云汇 - Airwallex, an international cross-border payment platform, secured a Chinese domestic payment license in March 2023 by fully acquiring licensed payment institution Guangzhou Shangwutong Network Technology Co., Ltd. This move allows Airwallex to provide legal cross-border payment services within China, aligning with regulatory requirements and expanding its market reach.
- Payoneer
派安盈 - Payoneer is an external payment platform. Despite not initially holding a Chinese payment license, it is expected to complete the acquisition of a Chinese third-party payment institution soon. This move aligns with the regulatory requirements for providing cross-border payment services in China.
- WorldFirst
万里汇 - WorldFirst is a cross-border payment service provider. In 2019, it was entirely acquired by Alipay, a subsidiary of Alibaba. This acquisition allowed WorldFirst to gain a significant foothold in the Chinese market and offer enhanced cross-border payment solutions. The company operates under the name 万里汇 in China and continues to be an active player in the cross-border e-commerce and payments sector.
- Thunes
Thunes - Thunes, a global cross-border payment company, established its Greater China headquarters in Beijing and is actively applying for a payment license in China.
- 2011：
- Alipay, Tenpay, and 27 other payment institutions received the first batch of payment licenses.
- January 2015：
- The pilot program for cross-border e-commerce forex payment operations was expanded to 269 payment institutions holding payment business licenses.
- March 2018：
- The People's Bank of China issued Announcement No. 7, explicitly stating the requirements for foreign institutions providing electronic payment services in China.
- February 2019：
- London-based WorldFirst was wholly acquired by Alipay.
- April 2019：
- The State Administration of Foreign Exchange (SAFE) issued the 'Administrative Measures for Foreign Exchange Business of Payment Institutions' (Document No. 13).
- By 2019：
- The People’s Bank of China and the State Administration of Foreign Exchange established the principle of licensed operations for cross-border payments.
- September 2019：
- PayPal obtained approval from the People's Bank of China after acquiring Guofubao Information Technology Co., Ltd.
- End of 2021：
- PingPong acquired a 51% controlling stake in Zhejiang Aerospace Electronic Information Industry Co., Ltd., obtaining a payment license.
- 2023：
- The total import and export volume of China's cross-border e-commerce reached 2.38 trillion yuan.
- 2023：
- The number of cross-border internet payment transactions by non-bank payment institutions reached approximately 8.2 billion.
- March 2023：
- Airwallex secured a license to operate payment services within China.
- June 15, 2023：
- Global cross-border payment company Thunes opened its Greater China regional headquarters in Beijing.
- First quarter of 2024：
- The cross-border e-commerce import and export volume was 577.6 billion yuan.
- May 1, 2024：
- The 'Regulations on the Supervision and Administration of Non-Banking Payment Institutions' were implemented.
- June 12, 2024：
- The Ministry of Commerce, the National Development and Reform Commission, and the People's Bank of China, along with six other departments, issued the 'Opinions on Expanding Cross-Border E-Commerce Exports and Promoting the Construction of Overseas Warehouses.'
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