Payoneer cooperates with eBay for Chinese market with doubtful compliance

International cross-border payment giant Payoneer has announced a partnership with eBay to become eBay’s exclusive payment and receipt service in Greater China. However, Payoneer’s official website does not indicate that it holds a cross-border payment license in China, and it faces some questions about its business compliance for the Chinese market.

Is Payoneer’s business in China compliant?

In the past, Chinese e-commerce companies have used platforms such as Amazon to sell goods to overseas consumers, and the money they receive goes into domestic accounts, following the traditional method of transferring money through multiple financial institutions and taking a lot of time. Fintech companies engaged in cross-border payment collection have emerged to address this pain point. In addition to Payoneer, there are Paypal, Skyee and so on.

Payoneer was founded in 2005 and is based in New York. Currently, Payoneer services are available in more than 200 countries and have more than 4 million users, including cross-border e-commerce, freelancers, B&B landlords, etc. Payoneer supports exchange in more than 150 currencies and transfers funds to customers’ bank accounts in their home countries.

In 2013, Payoneer entered the Chinese market, initially providing payment collection service for Chinese sellers on Amazon, and set up a branch in China – Paianying (Guangzhou) Business Services Co., Ltd.

With respect to the eBay partnership, Payoneer helps merchants receive the proceeds of their eBay sales. The funds are first paid into merchants’ Payoneer accounts in the form of US dollars. Payoneer then converts the proceeds into local currency and refunds them into merchants’ bank accounts.

Merchants can also make payments to business partners such as suppliers, outsourcers, make purchases to suppliers, and complete global VAT payments through Payoneer accounts.

However, in terms of business compliance, Payoneer’s official website does not indicate that it has a cross-border payment license issued by China.

The customer service staff of Payoneer told the reporter that Payoneer has the Money Service Business License in the United States and the E-Money License in Europe. It complies with the financial laws and regulations of various countries and guarantees the security of customers’ funds and data, and the Business of Payoneer in China is legal and compliant. But they did not say whether it had a cross-border payment license in China. The reporter also wrote to Payoneer for an interview on compliance and other issues, but did not receive a reply as of press time.

According to Payoneer’s official website, Payoneer “authorizes financial institutions that have the State Administration of Foreign Exchange of China (SAFE)’s settlement license to settle foreign exchange, guaranteeing safe, professional and fast arrival of RMB, with no pressure on compliance.”

Previously, Payoneer CEO Scott Galit revealed to the media that Payoneer completed the international cross-border payment business through the cooperation with Citibank, Deutsche Bank and many other multinational banks. Payoneer has partnered with local banks in some countries, such as Bank of Tokyo-Mitsubishi UFJ in Japan and the National Australia Bank in Australia. In China, Payoneer has partnered with Ping An Bank.

Galit said Payoneer is directly regulated in the United States, Canada, the United Kingdom, Japan and other markets. It is not directly regulated in China and other markets, but its business and products are in compliance. In China, it will cooperate with some financial institutions to meet Chinese regulatory requirements.

It can be seen that in order to achieve compliance exhibition industry in China, Payoneer has adopted the mode of cooperation with licensed organizations.

Cross-border payment regulation has been tightened

Payoneer’s cooperation model is not an exception. According to the report of “China Cross-border Payment Industry Annual Analysis 2020” by Analysys, it is common for China’s domestic licensed payment institutions to cooperate with overseas collection agencies for collection business, as domestic licensed institutions have a rich local experience, while overseas collection agencies have advantages in global payment network, possess multi-country payment licenses, start layout earlier, and have more perfect product and service systems, which are also attractive to domestic payment institutions.

Some Chinese analysts believe that the “non-license exhibition industry” is also part of the cross-border payment chain, and it is understandable for institutions holding overseas payment licenses to cooperate with Chinese licensed payment institutions under the premise of compliance.

But this kind of model has certain controversy in the industry. Chinese merchants open accounts and receive payments on Payoneer. Is Payoneer a direct service to Chinese users? Can the users’ capital security and information security be effectively guaranteed?

After all, China has a clear license regulation on cross-border payment business, and the supervision situation of the payment industry as a whole is increasingly strict.

In September 2007, SAFE allowed Alipay to handle overseas receipt business, marking the formal start of China’s cross-border payment industry. SAFE launched a pilot program of cross-border foreign exchange payments in Beijing and five other regions in 2013, and expanded the program to 30 institutions nationwide in 2015, up from 17 at the beginning.

In April 2019, SAFE issued the “Measures for the Administration of Foreign Exchange Businesses of Payment Institutions”, emphasizing the legitimate qualifications of cross-border payment businesses. In March 2020, Alipay, Tenpay, HuiPay, YiPay, LianlianPay and other pilot payment institutions were registered in the official list.

Wang Pengbo, a senior payment industry analyst, told the reporter that foreign cross-border payment institutions, which operate through cooperation with licensed institutions, are still less reliable than their own licenses in terms of capital security.

It will be interesting to see how unlicensed international cross-border payment companies will develop in China in the future. Especially not long ago, PayPal completed the acquisition of GoPay, becoming the first foreign payment institution to be licensed in China. Whether other foreign companies will follow the same path cannot be ruled out given the gradual opening of the Chinese financial market.

Competition in the cross-border payment industry has intensified as foreign giants such as Payoneer increase their presence in the Chinese market.

In recent years, the development of cross-border e-commerce in China has led to the substantial growth of cross-border payment business. Cross-border Internet transactions by third-party payment institutions in China exceeded 740 billion yuan in 2019, up nearly 50.0% from 2018, according to data from the China Payment and Clearing Association.

In 2020, the outbreak of the COVID-19 pandemic broke out all over the world, impeding international logistics and greatly affecting the cross-border payment of the property. But in the long term, globalization remains the mainstream, and industry insiders are generally optimistic about the development potential of cross-border e-commerce and cross-border payments. The scale of China’s cross-border e-commerce industry is expected to reach 6.9424 trillion yuan in 2021, according to the Qianzhan Industry Research Institute.

Analysys report also pointed out that in the future, the scale of cross-border payment transactions will continue to grow, and the needs of different types of customers will be diversified. Chinese domestic banks, overseas collection agencies and domestic licensed payment institutions are entering the market, and the industry competition is becoming increasingly fierce. And the payment institutions that can provide specialized services, especially those that can provide more value-added services on the basis of payment, will have more advantages in the future.

Source: China Times

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