Key words in the first half of the payment industry: name change, intensified competition, and accelerated going overseas

Author | "Caijing" new media Wang Baiyun editor | Jiang Shizhou

Take stock of the major events in the payment field in the first half of 2024: In June, Hezhong Yibao changed its name to Douyin Pay; In May, Zhejiang Aerospace Electronics, a subsidiary of PingPong, was fined 44.2162 million yuan by the central bank, and in May, the "Regulations on the Supervision and Administration of Non-bank Payment Institutions" was officially implemented. In April, Hailian Jinhui announced that Tianjin Tongrong, an affiliate of Douyin, planned to acquire 100% of the shares of Liandong Commerce; In April, Fuyou Payment submitted the form to the Hong Kong Stock Exchange; In March, Lianlian Digital was listed on the Hong Kong stock market.

Keywords such as "name change", "intensified competition", "accelerating going overseas", "listing window period" and "strict supervision" run through the payment field.

01

Competition has intensified, and Douyin has completed the offline acquiring business license

In 2024, Douyin will accelerate the pace of layout payment.

On April 3, Hailian Jinhui announced that the company intends to transfer 100% of the equity of UMF held by its wholly-owned subsidiary, UMF, to Tianjin Tongrong. Tianjin Tongrong, as an affiliate of Douyin Group, holds 100% of the equity of Hezhong Yibao. If the acquisition is completed, it means that Douyin completes the offline acquiring business license; In June, information released by the central bank showed that Hezhong Yibao changed its name to "Douyin Pay".

Qin Gang, marketing director of Helibao, believes that the development of Internet platforms needs to build payment services at a certain stage. As a financial infrastructure, payment needs to be licensed, especially with the tightening of regulatory policies, the importance of payment licenses has become more prominent.

Qin Gang said that the essential reason for the layout of payment by traffic giants is "ecology". At present, Internet giants are improving the user ecology, and in the user ecology, payment is the underlying support for the flow of financial business transactions. "For example, a leading e-commerce platform also used Alipay to complete transactions at the beginning, but since 2008, the scale of the platform's transactions has gradually increased, and the platform has gradually realized that it needs to master user accounts and transaction behaviors, which is the core thing, so it acquired the payment license."

Meng Hongxing, director of Baofu payment products, believes that in the context of the tightening macro environment, Internet companies need to find new growth engines, and enterprises will also enter a new round of competition.

In the short term, the layout of Internet giants will not have much impact on the payment pattern, but in the future, it may bring about a "diversion" effect and reduce the concentration of the payment market. Some payment practitioners said that large Internet enterprises have a wide range of business layouts, large business volumes, and their own payment capabilities, which can save a certain transaction rate in the long run, and the payment institutions of single-channel services may be greatly affected.

Meng Hongxing believes that the entry of Internet companies will divide part of the existing market scale, which also requires third-party payment institutions in the middle and waist to compete differently in business.

02

Expand cross-border business and accelerate the layout of overseas expansion

On June 11, the Ministry of Commerce and other nine departments jointly issued the "Opinions on Expanding Cross-border E-commerce Exports and Promoting the Construction of Overseas Warehouses". It mentions that eligible banks and non-bank payment institutions will be supported to provide efficient and low-cost cross-border fund settlement services for cross-border e-commerce enterprises with electronic transaction information in accordance with regulations. On the premise of complying with the requirements of laws and regulations and ensuring security, promote and regulate the cross-border flow of data, and allow the orderly and free flow of data in cross-border e-commerce, cross-border payment, and other application scenarios.

A number of payment practitioners said that under the intensification of competition in the domestic market and favorable policies, some payment institutions have accelerated the expansion of cross-border business.

iResearch Statistics estimates that in 2022, the overall achievable market size (TAM) of China's cross-border export B2B trade payment will be 4.9 trillion yuan (that is, the total business scale of small, medium and micro enterprises in the general trade volume), a year-on-year increase of 40%. At the same time, in 2022, the actual business scale of cross-border payment institutions will be 345.1 billion yuan, and the overall market penetration rate is still less than 10%, and the market development space is huge. According to the preliminary estimate of the General Administration of Customs, in 2023, China's cross-border e-commerce exports will be 1.83 trillion yuan, a year-on-year increase of 19.6%.

The relevant person in charge of Huifu Payment said that the expansion of overseas markets is undoubtedly one of the inevitable choices for the development of the current industry, and there is a large space for imagination.

Some payment practitioners said that the cross-border payment business includes settlement services for the return of funds from overseas enterprises, domestic payment in foreign currency and overseas payment, etc., and its profits include payment fees and exchange differences.

"The margins on the commission are very thin or even not profitable. The main profit margin of cross-border payment is in the exchange rate difference, and the RMB has a certain fluctuation range every day, and at the same time, you can obtain a certain profit by mastering the fluctuation law of foreign currencies such as the US dollar, which will be a little better than that of China. Qin Gang said that the domestic payment fee is 6 yuan per 1,000 yuan: 70% for banks, 10% for UnionPay, and 20% for payment companies (which also need to be distributed to channel agents). Comparatively speaking, cross-border payment profit margins will be larger.

In addition, judging from the development of overseas markets in recent years, Europe, the United States, Southeast Asia and other countries have shown strong demand for localized payments. According to the "Special Analysis of China's Third-Party Payment Market 2024", in 2023, more than 20 payment institutions such as Lianlian Digital, Xinguodu, Yika, and PingPong will obtain licenses around the world.

On June 11, UEFA released the Euro 2024 Scoring Champion Trophy, which was named Alipay+, a global brand under Ant Group. Some analysts pointed out that behind this move is the epitome of the acceleration of Ant Group's globalization strategy, which aims to seek incremental markets overseas.

03

Strict supervision continued, and 36 payment institutions changed their names

The Regulations on the Supervision and Administration of Non-bank Payment Institutions, which came into effect on May 1 this year, clearly state that the word "payment" shall be indicated in the name of non-bank payment institutions. During the year, 36 payment institutions changed their names.

In addition, the Regulations require that the same shareholder shall not directly or indirectly hold more than 10% of the equity or voting rights of two or more non-bank payment institutions of the same business type, and the same actual controller shall not control two or more non-bank payment institutions of the same business type (unless otherwise stipulated by the state). According to the administrative licensing decision issued by the central bank, it was agreed that Ping An Pay Electronic Payment Co., Ltd. would merge with Ping An Pay Technology Service Co., Ltd., and after the merger, the registered capital of Ping An Pay Electronic would increase to 1,169.58 million yuan, and the business type of "Payment Business License" would increase the issuance and acceptance of prepaid cards (nationwide), and Ping An Pay Technology would terminate its payment business and cancel its "Payment Business License".

In the first half of 2024, the payment sector continued to be tightly regulated. According to the statistics of Caijing new media, the central bank disclosed a total of 24 fines involving payment companies during the year, with a total penalty amount of more than 100 million yuan.

Among them, Zhejiang Aerospace Electronics received the largest fine in the first half of the year and was warned by the central bank for "violating the regulations on institutional management, merchant management, liquidation management, account management, etc., failing to perform customer identification obligations, keeping customer identity information and transaction records, submitting suspicious transaction reports, and trading with unidentified customers or opening anonymous accounts and pseudonymous accounts for customers". and confiscated 15.9631 million yuan of illegal gains, fined 28.2531 million yuan, and confiscated a total of 44.2162 million yuan.

Judging from the overall content of fines in the first half of the year, the penalties are concentrated in the fields of payment and settlement management and account management, reflecting that the supervision focuses on the operational compliance of third-party payment institutions, emphasizes improving payment security, and focuses on strengthening the supervision of capital flow.

Pan Helin, a well-known economist, said that in the first half of 2024, the industry's name change and license merger all indicate that payment institutions are facing higher compliance requirements.