How global banks compete in China’s crowded payments market

Global banks and Chinese joint stock commercial banks have found unique strategies to enter the China market, in cross border payments, cash management and e-wallets

Illustration by Sara Sen
Illustration by Sara Sen

DOMINATED by technology leaders such as Alipay and WeChat, as well as Chinese state-owned banks, the payments market in China leaves little room for participation from other players. Yet, global banks and Chinese joint stock commercial banks have found unique strategies to enter the crowded market.

One business that international banks are able to capture is in facilitating cross border payments. For example, in late 2017 BNP Paribas launched WeChat Pay in Europe in partnership with Galeries Lafayette Group, targeting Chinese tourists.

In China, an international bank is providing cross border cash management solutions with Chinese payment company Lianlian Pay, the fourth-largest payment platform in China. The details of the solution are not public at this stage. Through partnership with PayPal and international banks, Lianlian enables overseas corporates to make swift cross-border payments to China.

In January this year, DBS (China) launched a multi-currency account solution to its corporate clients, which enables its clients to make cross-border payment in various currencies under one single account.

The growing emergence of the online-to-offline model in China has also given rise to opportunities for millions of merchants looking to increase their sales with the adoption of mobile payments.

“In the past, most of the point-of-sales or offline payments from individuals were by cash or through credit cards,” says Sam Xu, head of transaction banking at Standard Chartered (China) in an interview with The Asset. “There is a pressing need for these corporates relying on offline sales models to also to be able to collect from individuals via mobile wallets.”

Standard Chartered launched its mobile wallet collection service in China in 2017. Through working with WeChat and China UnionPay Merchant Services, the bank allows its international corporate clients to receive offline mobile payments. China Guangfa Bank also launched its “Smart Mobile Collection” project that allows its corporate clients to generate a single QR code to accept payments from both WeChat and Alipay.

The burgeoning payment market in China has reached a scale where regulators started to put it in control. In 2018, a central online payment clearing entity called Wang’lian (网联) will be in place and become the sole clearing house, replacing the old bilateral clearing model.

“It does not have an immediate impact on us in terms of the collection model. It will have an impact on individual wallet owners’ user experience when it comes to wallet top up,” says Xu. “An individual users could choose to top up his wallet from any of his bank accounts so long as that bank participates in Wang’lian. This will give wallet users more choices of banks, and will also allow the central bank to directly monitor the transactions between mobile wallets and bank accounts.”