Since it is a cross-border payment in the cross-border micro-e-commerce transaction process, it will inevitably involve foreign exchange settlement. First, let’s understand how the foreign exchange settlement link in the cross-border micro-e-commerce payment process is completed.
According to the various laws and regulations formulated by my country’s State Administration of Foreign Exchange, we can know that there are generally three ways to settle foreign exchange. They are personal domestic ID card settlement, HSBC domestic ATM withdrawal and offshore company remittance to domestic enterprises.
1. Personal domestic ID card settlement
According to the regulations of my country’s State Administration of Foreign Exchange, the total amount of personal domestic settlement is limited to 50,000 US dollars per person per year. For general cross-border micro-e-commerce, their annual performance should not exceed 50,000 US dollars, so they can easily complete the settlement of foreign exchange with their ID cards.
But for those cross-border micro-e-commerce with relatively strong strength and relatively large scale, their annual performance will naturally not be only 50,000 US dollars.
For example, my friend Lao Liu is a cross-border micro-e-commerce, he mainly sells French luxury goods to domestic consumers. Because he is experienced and has a regular source of goods, his annual sales must reach about 80,000 US dollars. To settle foreign exchange, you must use two ID cards. Since he only had one ID card, he had to borrow his wife’s ID card. Undoubtedly, this brought inconvenience to his in-house foreign exchange settlement.
Let’s assume that a medium-sized cross-border micro-e-commerce enterprise has a sales performance of 1 million US dollars a year. If the enterprise adopts the method of personal domestic ID card settlement, it will need 20 different ID cards a year to complete the settlement operation. This is undoubtedly very inconvenient.
2. HSBC domestic ATM withdrawal
HSBC domestic ATM withdrawal means that users with Hong Kong HSBC bank accounts can withdraw cash through ATM machines in the country. HSBC is the largest registered bank in Hong Kong and one of the three major note-issuing banks in Hong Kong. HSBC enjoys a high reputation in the world because of its strong financial strength and long history.
But even for HSBC, users will also have an upper limit when withdrawing money, that is, no more than 20,000 Hong Kong dollars (or the equivalent in RMB) per day. Since the maximum withdrawal amount set by ATM machines in my country is 5,000 yuan per time, if a cross-border micro-e-commerce wants to withdraw all 20,000 Hong Kong dollars in one day, it needs to operate four times. The handling fee for withdrawing money from HSBC’s ATM machines in China is 25 Hong Kong dollars per time. In other words, the withdrawal fee that cross-border micro-e-commerce has to pay in one day is as high as 100 Hong Kong dollars, accounting for 0.5% of the transaction amount. This is undoubtedly a considerable expense. Therefore, this way of foreign exchange settlement is also difficult to satisfy cross-border micro-e-commerce.
3. Offshore companies remit money to domestic enterprises
Offshore companies remit money to domestic enterprises. This way of foreign exchange settlement is not an option for ordinary cross-border micro-e-commerce, and ordinary cross-border micro-e-commerce does not have the ability to choose this way of foreign exchange settlement. Although this kind of foreign exchange settlement is not subject to the amount limit, it requires the cooperating domestic enterprises to have accounts abroad, that is, foreign currency accounts. What is more difficult is that this way of foreign exchange settlement involves many operating procedures, high costs, and the settlement time is generally more than 7 days. Therefore, most cross-border micro-e-commerce companies focusing on exports are unwilling to choose this way of foreign exchange settlement.
In summary, given that the above-mentioned foreign exchange settlement channels are not perfect and cannot meet the foreign exchange settlement needs of many cross-border micro-e-commerce companies, before the government has formulated a complete foreign exchange settlement measure, some gray payment chains will be created. The most representative of these is the underground money houses.
Therefore, the current foreign exchange settlement process and details are not perfect enough, and there are still many pain points, but with the healthy development of cross-border micro-e-commerce in my country and the world, these problems and pain points will soon be solved.