(Yicai) May 21 -- An increasing number of Chinese payment institutions are eying entering overseas markets as an important strategy for their development against the backdrop of continuous pressure on domestic payment rates and a nearly saturated incremental market.

The main driving force behind Chinese payment platforms' accelerated pursuit of overseas licenses is to enhance their profit capabilities, several industry insiders told Yicai. Due to the intense competition in the domestic market, the service rates have remained at a low level of 0.3 percent to 0.6 percent, while the rates for cross-border payment services typically range from 1.5 percent to 3 percent, they pointed out.

Hangzhou-based Lianlian DigiTech became the latest payment platform to go global after obtaining a Category 3D license from the Dubai Financial Services Authority on May 19. The license allows it to operate payment accounts, execute payment transactions, issue payment tools, provide account information services, and provide payment initiation services in the Dubai International Financial Center.

In addition, the global payment system is undergoing rapid evolution, which requires overseas operations to build payment infrastructure tailored to the local habits of target markets, the insiders noted.

"The previous goal of Chinese payment platforms' overseas expansion was mainly to help domestic companies retrieve their money from overseas," a person in the cross-border payment industry told Yicai. "But it has changed to them hoping to become part of the local payment infrastructure through operating overseas to better serve global merchants and local consumers."

For instance, Tencent Financial Technology's cross-border payment platform TenPay Global has launched its WeChat mini program in Singapore, enabling overseas users to complete payments using local tools via the mini program, helping local customers improve conversion rates and transaction volumes.

Chinese payment platforms are shifting from providing a single payment experience to building infrastructure overseas that can accommodate local payment habits, an industry insider said to Yicai. "More emphasis used to be placed on replicating the domestic model, but now more and more firms run based on a localized strategy."

The distribution areas of payment platforms' licenses are also changing. Besides key markets such as Europe, the United States, and Southeast Asia, they increasingly target emerging markets like the Middle East and Latin America, and together with the services they provide in regional hubs, including Hong Kong, the Chinese mainland, and Singapore, form a global compliance payment network with a clearer hierarchy.

Challenges Beyond Obtaining a License

Chinese payment platforms still face operational challenges, such as adapting to regulatory differences when they obtain overseas licenses and expand their business abroad. Regulatory requirements for anti-money laundering, Know Your Customer verification, data protection, and capital settlement vary significantly from country to country.

The real challenge they face when operating overseas is not obtaining a license, but the ensuing compliance operations on a going-concern basis, a person from a payment platform told Yicai. "Behind a license lies a complete set of local risk control, AML, customer service, and data systems."

The core of future competition among payment institutions will gradually shift from "capabilities of obtaining licenses" to a comprehensive ability encompassing "technology, compliance, and global-localized services," an executive from the payment sector said to Yicai. It is necessary to fully consider geopolitical risks and the new risks that may arise from the application of artificial intelligence technology, the person stressed.

Editors: Tang Shihua, Martin Kadiev