China’s Third Party Payments Sector Sees Boom in Cross-border Transactions


China’s third party payments sector has seen a surge in the volume of cross-border transactions, with industry observers expecting robust growth going ahead as well as greater focus on the e-commerce segment.

Last year China’s third-party payment providers saw approximately 1.256 billion cross-border online transactions for a year-on-year rise of 114.7%.

The total value of these transactions was around 320 billion yuan according to data from the Payment & Clearing Association of China.

As demand for cross-border transactions continues to increase, a number of third party payments entities expect cross-border transactions to continue to see annualised growth in excess of 50%.

The shake up is also abetting opportunities for smaller players on a market where established giants such as Alipay and Tencent continue to enjoy a majority share.

Huifu (汇付天下) saw its cross-border payments transactions surge sixteen-fold last year compared to 2016, while transactions for just the first four months of 2018 have already exceeded the figure for full-year 2017.

Monthly transactions for Baofu’s (宝付) one-stop cross-border payments platform have consistently remained at around the 1 billion yuan level.

Baofu grabbed a 6.82% share of China’s third party online payments market in the first quarter of 2018, as compared to a 23.83% for Alipay, a 23.53% share for China UMS, and a 10.14% share for Ant Financial., according to figures compiled by 21st Century Business Herald

Other prominent players include (快钱) , with a 6.82% share; MobileBest (易宝支付), with a 4.04% share, and iPS (环迅支付), with a 3.91% share.

“If we fail to make further arrangements for cross-border payments, then we’re completely on the out,” said Zeng Cheng, a pseudonymous executive at a third-party payments provider, to 21st Century Business Herald.

“Licensed payments organisations will stand out amidst intense market competition, and road ahead remains long and hard.”

Chinese departments has reportedly issued only thirty cross-border forex payment licenses and just five cross-border renminbi payment licenses, with key business scopes including educational payments, overseas travel payments, and e-commerce payments.

“Since there aren’t many cross-border payments licenses, at present cross-border e-commerce payments competition is especially intense,” said Zeng.

This competition is further heightened by the fact that cross-border educational payments are usually only made several times a year for tuition fees, while cross-border travel payments have a peak season, leading to problems with “idle capacity” for much of the year.

As a consequence many licensed third-party payments providers have set their sights on the more stable, higher frequency e-commerce payments market., with B2B payments viewed as especially promising.

“At present the consumer end of the payments scene for e-commerce, aviation and gaming is approaching saturation, while the two giants of Alipay and WeChat firmly occupy the majority of the market,” said Zeng.

“In contrast there are comparatively few products on the market for cross-border business markets, while transaction costs are lower, services are flexible, and the volume requirements for expansion of operations aren’t high.

“[This] suits third party payments providers seeking new space for business growth and competitive advantages.”

Competition in the area of e-commerce has further been intensified, however, by the fact that many cross-border payments licenses have been restricted to just e-commerce payments since 2015, after a large-scale decline in the renminbi exchange rate compelled regulators to tighten up on capital outflows.

This heightened competition has prompted third party payments providers to dramatically reduce their rates for cross-border transactions in order to plump up market share – from highs of around 2% just several years ago to as low as 0.5 – 0.7% at present.

Other methods being used by third party payments providers to improve competitiveness include the introduction of new technologies to reduce operating costs, and the provision of more value-added services.