2012 was A Big Year for Chinese Independent Payments Services

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image credit: CFP 

It turns out 2012 was a big year for the payments market in China. Banks rolled out new payments offerings, telecom operators tapped into mobile payments sector and e-commerce services were building their own payment solutions, etc. More contributions or innovations, however, are from independent payments services, as results of 1) conventional enterprises or organizations came to need third-party payments services for e-commerce transactions or other needs; 2) mobile payments applications enlarge the market; 3) new payments solutions created for insurance, mutual funds, education, international payments, and so on; 4) new payments tools such as Square-like devices and QR code. Below are some examples:

  • Companies created new services to fulfill the emerging needs of conventional enterprises. 99bill built a platform for enterprises to manage cash flows. IPS and YEEPAY is exploring education sector, offering payments services to colleges.
  • Alipay released QR code-based payments service in December 2012. Any user can receive a payment with a QR code generated via Alipay. Tenpay, the payments service under Tencent, announced QR code-based Weixin payment solution which is expected to create a mobile-commerce ecosystem within the mobile messaging app.
  • Most well-known payments services, including Alipay, 99bill, La Ka La, IPS, Yeepay, iBoxpay and UnionPay, launched Square clones. Some designed devices like mini POS terminals, such as QPOS, for small businesses.
  • Tenpay, partnering with America Express, Cybersource and Asiapay, taps into international payments. 99bill serves enterprises with international payments services.

Also the entry bar is lowered that obtaining a license isn’t so difficult as that in some other sectors in China. The Chinese central bank, the People’s Bank of China, has issued a total of 223 payments licenses to private non-financial companies from May 2011 to 2012. The allowed services cover national and local payments services, pre-paid cards, digital TV payment solutions and payments for mutual funds. It is perceived that the authorities are open to the payments market. Some companies think the market is better organized thanks to regulations like issuing licenses.

Price wars intensified in this sector after more players joined in, as there isn’t much difference in service offered and license isn’t an issue anymore. Profits were driven down as a result that commission rates were reduced.

Mergers and investments happened from time to time in the past year. It is expected that consolidation will continue. Zhuo Dongwei, the vice GM of IPS expected that one third of the existing payments companies will die in the next two or three years. The cutting edge of early entrants’ lies in consumption and payments data, and small- to mid – sized business customers.

Authorities finally settled technical standards for mobile payments in 2012 — previously UnionPay, the bank association in China, and China Mobile adopted different RFID frequencies. It is expected that more mobile solutions will come out in 2013.