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Eyeing Emerging Cross-border Payment Market, Payment Agencies Improve Competitiveness by Offering Differential Value-added Services
In 2014, China’s import electronic commerce size jumped 58.92% year on year to RMB 476.29 billion, representing a fast growth of the cross-border electronic commerce, show Analysys’ survey data.
  • 31 Dec, 2015
  • Finance
  • 2222
Event Review:
On November 11, 2015, Union Mobile Pay (UMP) won the license for the pilot of foreign exchange payment under cross-border electronic commerce as a payment agency from the Beijing Foreign Exchange Control Department of the State Administration of Foreign Exchange (SAFE). It is the only Beijing Region-based payment agency that has won the green light to pilot the cross-border payment business after the SAFE issued the Notice of the State Administration of Foreign Exchange on Implementing the Pilot of Cross-border Foreign Exchange Payment Business of Payment Institutions (SAFE Document [2015] No. 7) ("Document 7”).
Analysys Insight:
In 2014, China’s import electronic commerce size jumped 58.92% year on year to RMB 476.29 billion, representing a fast growth of the cross-border electronic commerce, show Analysys’ survey data. Besides, during the “November 11” event that has just finished, AliExpress.com, the cross-border export platform under the flag of Alibaba.com, disclosed that during the event, it received more than 20 million cross-border export orders from 214 countries and regions, indicating the great prosperity of cross-border electronic commerce.

Since September 2013, the SAFE has recorded 1,329,000 pilot transactions under the electronic commerce pilot business, involving USD 3.32 billion in total, according to its data. Particularly in January to May 2015 alone, the transaction value was close to the combined amount from the start of the pilot to the end of 2014. This shows rapid growth of the swift growth of the cross-border electronic commerce in 2015.

In the broad sense, the cross-border payment business means the cross-border foreign trade import and export involving the participation of payment agencies. As early as in 2000, payment institutions started taking a part in the business, but at that time, they existed only as a payment channel and couldn’t handle the foreign exchange and settlement business. In the narrow sense, the pilot license for cross-border payment business means that a payment agency winning the pilot license can deliver relevant concentrated foreign exchange collection & payment service and relevant foreign exchange sale & settlement service, and only offer the service under the online payment business under the cross-border electronic commerce business after the SAFE issued the document in 2013.

In the opinion of Analysys, despite overall rapid growth of the cross-border electronic commerce payment business, the payment agencies position the business in different ways judging from the business mode:

Relying on powerful resources, Alipay and Tenpay were the first agencies approved to pilot the cross-border payment business in 2013, initiated the business at the earliest, and have the biggest merchant base. Besides, they also deliver the local offline payment service through cooperation with foreign banks.

Highly experience in mobile e-commerce area, UMP has always delivered the payment service to Meituan.com, Mogujie.com and other websites, and now takes the leader in the mobile payment area. Now, after winning the pilot license as the only third-party payment agency based in Beijing, UMP will develop the cross-border and international business more actively. In future, it will not only deliver the payment service to cross-border e-commerce sites on the mobile client, but also expand the cross-border electronic commerce business on the Internet and offer the exchange payment and settlement service to domestic and overseas cross-border e-commerce customers.

It is learned that UMP’s cross-border payment license covers nine business areas, representing the broadest business scope among all the third-party payment agencies that have won the license, and covering trade in goods, hotel & accommodation, air ticket, overseas education, international exhibition, communication service, international transport and software service. In particular, the “communication service" is exclusive, meaning UMP can use its resources and cooperation with China Mobile to deliver the international communication payment service. Besides, UMP’s cross-border payment license supports the settlement with merchants in 239 countries and regions and covers 14 mainstream foreign currencies, including Hong Kong dollar, Macau Pataca, Japanese yen, British pound, Euro, the US dollar, the Canadian dollar, the Australian dollar, the Swiss franc, Danish Krona, Swedish Krona, Norwegian Krona, New Zealand dollar and the Singapore dollar.

YeePay is the integrated cross-border financial service solution provided by Ehking, a cross-border service company, for cross-border electronic commerce platforms (companies). Now, YeePay has completed the registration with the pilot customs houses in different regions, and delivers the integrated cross-border e-commerce payment solution for cross-border sites based on cross-border payment and integration of three customs documents.

In 2013, the SAFE first issued the Notice on Implementing the Pilot of Cross-border Payment Business of Payment Institutions and decided to pilot the foreign exchange payment under cross-border electronic commerce at payment agencies in Shanghai, Beijing, Chongqing, Zhejiang, Shenzhen and other regions. After the pilot for almost two years, the SAFE published a new pilot document in January 2015. So far, more than 20 agencies have secured the pilot license. Document 7 sets even more stringent review requirements for the pilot business, but payment agencies still actively bid for the license. In the opinion of Analysys, they apply for the pilot because:

1.    The cross-border payment market embodies a vast potential. For one thing, cross-border electronic commerce will continue to drive the growth of the cross-border online payment transaction size amid the rise of China’s per capita income and consumption demand as well as the change in the online shopping habit, and for another, cross-border payment will propel common development of relevant industries relating to important and export such as logistics, warehousing, aviation and ticket, which will in turn stimulate the payment market.

2.    The current payment market needs breakthroughs. Since the outlet over ten years ago, payment is already a relatively mature industry and ubiquitous in daily life in China. Now, the payment business doesn't have an overall high profit margin. In this context, payment agencies are imperative to expand business scenes or offer value-added services to the payment business. Therefore, to keep competitive in future, payment agencies will still need to make breakthroughs in business universe and region and deliver safer and more covnenint payment service.

In the opinion of Analysys, the cross-border payment market will go on to grow quickly, and cross-border payment agencies that have won the pilot license will incubate new business growth areas. Yet, they will also need to deliver more personalized payment services based on industry and service to avoid malicious competition from homogenous services.

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Research Note:
To deliver the industrial analysis, Analysys mainly employs the industrial analysis model and combines the model with the market, industry and vendor research methods to mainly reflect the current market status, trend, deflection point and rules as well as the current status of vendors based on macroscopic industrial data, quarterly final user survey data, vendors' historical data and quarterly vendor monitoring information.
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