Payment is a basic service of the business system. In the past, there were two main forms of traditional cross-border payment: one is the international settlement business between banks, that is, remittances are made through traditional international settlement tools such as telegraphic transfers, mail transfers, and bill transfers; the other is the small remittance business represented by Western Union. The former is mainly for general trade business between companies, and the latter is mainly for individual customers.
In the traditional trade era, general trade is mostly large-scale import and export business, with fewer capital transactions and very strong planning. Therefore, the two parties to the transaction can reasonably arrange funds by using the international settlement business between banks. At the same time, most of the international transactions are professionals, with a relatively small number of people and a relatively small number of times. The small remittance business relies on an international network system to provide them with more convenient services.
However, traditional cross-border payment methods are facing new market challenges. In recent years, with the rapid development of cross-border e-commerce, my country’s cross-border business transactions have shown three characteristics that are significantly different from the past.
First, the import and export cross-border e-commerce has grown rapidly. In 2016, the overall transaction volume of China’s import and export cross-border e-commerce reached 6.7 trillion yuan, accounting for 27.5% of the total import and export volume, with a year-on-year growth rate of more than 20%, while the total import and export volume fell slightly by 0.9% during the same period. General trade has declined, while cross-border e-commerce has grown rapidly, showing strong vitality.
Second, the proportion of services has increased. This is mainly due to the close exchanges of personnel. The increasing number of international exchange activities such as tourism, study abroad, conferences, and exhibitions has promoted the prosperity and development of industries such as hotel accommodation, air tickets, study abroad education, international exhibitions, and tourism services. Individuals who are accustomed to mobile payments in domestic transactions hope to have a more convenient payment method than small remittances.
Third, the number of small and medium-sized enterprises participating in cross-border business operations is increasing. They have certain advantages in core competitiveness such as products, services or user marketing, but rely on social division of labor in other aspects such as customs declaration and logistics, and cross-border payment links are no exception.
High-frequency, small-amount small and medium-sized enterprises and individual consumers have put forward new requirements for cross-border payment products, namely, safe and convenient, simple and easy to use, fast settlement speed, and low transaction costs. In the traditional foreign trade era when exchanges were not frequent, international bank settlements and small remittances could basically meet market demand. However, as exchanges between China and the world become increasingly frequent, cross-border commercial exchanges have developed rapidly in recent years. The disadvantages of traditional payment methods such as international bank settlements and small remittances, such as long cycles and low frequencies, have been magnified, making it difficult to meet the needs of all parties, and have become a major bottleneck restricting cross-border commercial exchanges.