Author |Li Xiaotian.
Edit |Liu Jingfeng.
The Southeast Asian team of a cross-border payment company had a memorable experience when a fire broke out in the office building of a major local e-wallet in Indonesia, which directly caused the payment system to go down.
This is not uncommon in emerging markets, and only by continuously improving the payment infrastructure and multi-channel backup can we ensure that we are prepared. Its staff said to the Xiaguang Society.
In the wave of globalization of the digital economy, globalization is becoming an unswerving choice for more and more Chinese enterprises. Overseas people come overseas to find a new growth curve and life cycle. In the face of a completely unfamiliar overseas environment, especially in emerging markets where digital infrastructure needs to be improved, payment has become a key factor affecting the realization of enterprises.
Cross-border payment platforms, which are located in the upstream of the industrial chain, have attracted more and more attention. In the face of the opportunities and challenges given by the times, how will cross-border payment companies respond?
Throughout the history of China's cross-border payment development, 2013 is undoubtedly a key node in the cross-border payment industry. In this year, the scale of China's cross-border e-commerce transactions reached 2With 7 trillion yuan, the booming cross-border e-commerce industry provides fertile soil for the growth and expansion of third-party cross-border payment. It was also in this year that the state approved third-party payment companies to participate in cross-border payment business, accompanied by Made in China and Chinese brands, to jointly conquer overseas.
Looking back on how the industry has evolved over the next decade, Liam, CEO of fintech company Payermax, shared to Xiaguang: "I'm a payments veteran anymore. In the past decade, most of China's cross-border payment companies have been pouring into the same track, that is, the European and American markets, such as Airwallex, Lianlian Pay, Ant Group, etc. The reason is simple: the European and American markets have a large GMV and strong consumption power, so the growth rate is also fast. ”
According to Liam, there is already a mature payment system in the European and American markets. This system is first built on large global card organizations, such as Mastercard, Visa, and America ExpressSecond, its clearing system is built on very mature global banks, such as JPMorgan Chase and Standard Chartered, as well as global clearing organizations based on these mature financial systems, such as SWIFT. As a result, European and American payment companies such as Stripe and PayPal were born, which are in the leading position in the world in terms of valuation, service objects, and regions covered.
The choice of destination for cross-border payment is undoubtedly related to the market migration of Chinese enterprises going overseas. Whether it is the earliest foreign trade export, or the mobile Internet opened by companies such as Yiyi and Cheetah to go overseas, the European and American markets with mature markets and high user spending power are the first stop for most Chinese enterprises to make global nuggets.
However, with the restructuring of the global ** chain, the slowdown in economic growth in Europe and the United States, and the increasingly fierce competition in going overseas, emerging markets represented by Southeast Asia, the Middle East and Latin America are attracting more and more Chinese enterprises to explore business opportunities because of their broad market potential and development prospects.
According to a report released by PwC in September 2023, the overseas expansion of Chinese unicorns is expected to accelerate, with 67% of unicorns saying they plan to maintain or increase their overseas expansion efforts, compared to 41% in 2020. In terms of overseas expansion destinations, 36% of the companies surveyed chose the Asia-Pacific region, followed by North America with 32%. Other hot markets include RCEP members and countries and regions along the Belt and Road.
In this regard, Liam's judgment is that "the pattern of Southeast Asia is relatively stable, and the Middle East and Latin America are more uncertain, but they either have sufficient purchasing power, or have enough demographic dividend, and the opportunities are also greater." ”
In this context, Chinese cross-border payment companies are also following in the footsteps of overseas enterprises to lay out emerging markets.
However, this time, the payment company needs to face a completely unfamiliar business model and a digital infrastructure environment that needs to be improved urgently, and the past experience cannot be transplanted and replicated, and it is not easy to take root in a short period of time, so everything needs to start from scratch.
Different from the idea of migrating from the European and American markets with overseas enterprises, Payermax has been oriented to emerging markets since its birth.
Before everyone paid attention to this huge regional market, Payermax found another ecosystem here that is different from the European and American payment systems, actively embraced local regulation, and made friends with local financial institutions, Payermax spent several years slowly building a set of its own cross-border payment network, ahead of others.
Go back in time. In 2016, in order to crack down on the counterfeit banknote market, India issued a "demonetization order". This astonishing move has produced an unexpected result: many Indians have been forced to use mobile payments, e-wallets are booming, and PayTM, known as "Indian Alipay", has risen rapidly because of its many offline outlets, and in 2017 it became the world's third largest e-wallet after WeChat and Alipay.
In this context, in 2018, Payermax did a cold start of the e-wallet business in India. However, this cold start was not a particularly successful experiment.
One of the reasons is that overseas giants such as Google, Wal-Mart, and Facebook have all entered the game at this time, and the competition is too fierce. The second is that Payermax originally thought that "whoever wins the user wins the world", but it turned out that the user only has loyalty to wool, not to the e-wallet. "We couldn't really see a profitable business model in the short term, so we decided to make the switch. Liam recalled.
In the process of frequent communication with overseas enterprises, Payermax found that local payment methods in emerging markets are extremely fragmented and complex, and the cost of access is highThe payment digital infrastructure and financial regulatory system are not perfect, and enterprises going overseas have to face risks in terms of taxation, compliance, and capital security.
Due to geopolitics, the epidemic and other reasons, the global economic development is weak and uncertainties are increasing. This uncertainty has led to a change in the risk appetite of many large financial institutions. They are reluctant to spend a lot of money in emerging markets, so their penetration is limited. Many customers who do business in emerging markets are not well served in fact. Liam said.
So from 2019 to 2020, Payermax decided to do this part of the "hard work and tiring work", and the business direction shifted from To C to To B, and started to try in India and Indonesia respectively.
This is an area that the giants disdain. A few years ago, the combined transaction size of payments in Southeast Asia may not have been as large as that of Zhejiang Province. Payermax believes that "the most important thing is to do the business first and control the resources in your own hands." ”
In this process, Payermax slowly explored a set of its own business model, that is, it jumped out of the mature bank card organization system in Europe and the United States, and cooperated with local payment methods, local card issuers and payment companies to establish local acquiring capabilitiesAt the same time, it cooperates with local banks to achieve cross-border clearing, so as to establish its own payment game rules, and quickly "copy" this model and play to other emerging markets to achieve global coverage and connection.
The advantage of this is that "this part of the market group anchored by Payermax is difficult to penetrate and reach in the past European and American payment networks." In addition, the payment network in emerging markets has a lot of redundancy in its branches, which means that it can achieve faster service timeliness than traditional European and American financial networks. For example, the international fund clearing system SWIFT is not available 24/7, it has its own working hours, but emerging markets are different, if a merchant initiates a bank transfer to us now, Payermax's own network can bypass SWIFT. Liam said.
In 2020, the global outbreak of the new crown epidemic accelerated the digital transformation of human lifestyles. The experience of the digital economy, such as online shopping, food delivery, online games, and online social networking, has become an important part of life during the epidemic. The World Bank report released in June 2022 showed that the pandemic has led to an increase in the use of digital payments, with more than 40% of adults in low- and middle-income economies (excluding China) using a bank card, or the internet to make payments, and the digital revolution has profoundly changed the way people send and receive, borrow and save.
Many digital pan-entertainment apps have achieved rapid growth during the epidemic, and PayerMax has built a safe and reliable payment platform with more than 95% mainstream payment coverage by connecting with local financial institutions to help the development of Internet enterprises going overseas. "At that time, we were further convinced that it was the right direction to do business in emerging markets and serve China's overseas Internet companies. Liam said.
Since 2021, Payermax has ushered in a period of rapid business development, with the pace of Chinese overseas enterprises expanding into the global market, expanding its business to more emerging markets. Up to now, Payermax's business covers 83 countries and regions around the world, including Southeast Asia, the Middle East, and Latin America, covering e-commerce, digital entertainment, games, Internet finance, education and other fields, and has basically cooperated with merchants in the pan-entertainment field of the top 100 brands going overseas, showing rich successful experience in one-stop overseas payment solutions.
For people who go to sea, the "time machine theory" is all familiar. There is an objective time lag between emerging markets and mature markets, and this critical time window is an important opportunity for overseas enterprises to expand their territory.
Enterprises going overseas to the Middle East and Latin America, their service needs are far from being met as in China, Europe and the United States, and are still in a stage of evolutionary development. At this time, whoever has the patience to do a good enough job of localized service capabilities can take the lead and win customers. So I feel like there's still a long way to go in this tough competition. Liam said.
Caption: In 2022, Payermax was invited to participate in the Seamless Middle East, the largest global exhibition in the field of payments in the Middle East
In his view, the first thing cross-border payment companies compete for is the ultimate delivery capability.
If cross-border payment fights the best war, it is actually the stupidest way of business competition. Liam introduced that the gross profit of the cross-border payment industry is very low, and what is earned is the handling fee and part of the added value, if calculated from the overall operating cost of a overseas enterprise, the proportion is very low, far less than the cost of advertising and personnel expenditure.
Cross-border payment companies may reduce the handling fee by one percentage point, which is already nerve-wracking, but for customers, it only accounts for a very low cost and is not so important. ”
However, the quality of service provided by cross-border payment companies will have a real impact on customers' revenue. "If you help customers increase the payment success rate by 5 to 10 percentage points, it is equivalent to adding 5 to 10 points of revenue for the customer, which is far more critical than that handling fee. ”
This is also where the ultimate delivery capability comes in, especially in emerging markets where infrastructure is not perfect and uncertain. Liam recalls that because of network problems, Payermax has encountered local system downtime caused by **, "If the loading payment page is too gorgeous, it will not load because the network is too poor, so it is more important than anything to provide stable, continuous and efficient services, so that the user's payment can be completed as soon as possible." ”
In addition to extreme delivery, cross-border payments also require payment companies to have in-depth insight and thorough understanding of customers' business models. "If you don't understand the customer's own business model, you can't dig out the entire capital link behind it through his payment needs, you can't provide him with a package of solutions, and it is difficult to establish long-term close business cooperation. ”
According to Liam, in order to better understand the customer's business model, Payermax will have a dedicated product manager and pre-sales staff to keep abreast of the situation with the customerLocal solution staff will also directly understand and observe the customer's operation status locally, so as to gain insight into the customer's deep pain points and needs.
In addition, the localization capability of emerging markets is also one of the core competitive barriers.
To really do a good job in cross-border payment business, you need to be a friend of time, embrace local supervision, make friends with local financial institutions, and spend a long time to establish a payment system. And in the process of building a localization team, fully understand the local market and consumers, rather than making quick money. Liam concluded.
Whether it is faster response speed or better service quality, cross-border payment companies need to patiently apply for local payment licenses and gradually establish the ability of localized payment. In addition, excellent localization capabilities can also provide more additional services, such as providing tax payment services for overseas enterprises that have not yet set up a local entity, providing financial compliance advice for merchants, and using local resources to provide customers with strong support for marketing and operation.
Over the years, Payermax has also been trying to establish its own "moat" for cross-border payments in emerging markets, giving full play to its first-mover advantage.
Payermax wants to be a long-term investor. ”
Liam said that Payermax has always positioned itself as a connector: on the one hand, it connects consumers in emerging markets who have not yet integrated into the digital economy, and on the other hand, it connects Chinese enterprises and emerging markets to help them move forward faster and more steadily.
Due to geopolitical relations, Payermax was forced to abandon the Indian market. However, based on the accurate grasp of customer needs, Payermax began to explore the Southeast Asian market by using the original market experience and development strategy, and doubled the transaction volume in Indonesia in two months, and quickly met the large demand of customers who moved here. This experience also taught Payermax a "lesson": "The geopolitics of emerging markets are complex and volatile, and we need to expand our business territory and enhance business certainty by expanding our geographical coverage. Liam told Xiaguang Agency.
There is another milestone in Payermax's development that impresses Liam in particular. After the transformation to B, Payermax tailored a local payment solution for a pan-entertainment company in China, and quickly increased the proportion of the lowest-ranked local payment company on the payment platform to TOP 1, and the combined share of the second and third places is also difficult to match.
Prior to this, we always felt that Payermax was just doing a good job of serving overseas customers, and it was a nobody role in the marketBut through this incident, we found that as long as we serve customers well, it will really have an impact on the local payment landscape. ”
From that moment on, Payermax set up an internal system to serve KA customers (KeyAccount, i.e., "Key Customer").Follow the needs of customers, understand the customer's business model, and understand the needs of customers to conduct business. "If we make our customers, we will make ourselves. ”
Looking at cross-border payment in emerging markets, this is an area that has not been penetrated by the European and American payment systems, and there is no leading company that can dominate the market.
From the perspective of service area, many companies only serve a certain market such as the Middle East or Southeast Asia;From the perspective of the service industry, most of them only focus on a certain subdivision such as e-commerce, games, and social networkingFrom the perspective of service types, few cross-border payment companies can provide a full range of services such as acquiring, collection, and payment.
Payermax is currently committed to building a comprehensive and global payment ecosystem in various emerging markets, taking a completely different path from the previous payment system, which is also destined to be a difficult path to pioneer.
Starting in emerging markets, Payermax naturally has a sensitivity and understanding that is different from other teams, clearly knowing what emerging industries and top players are in each market, and has enough knowledge of local users. On the other hand, Payermax's understanding of emerging markets has also undergone a process of slow change.
Emerging markets, as commonly understood, refer to developing countries or underdeveloped regions. If this is taken as a standard, then the per capita GDP is comparable to that of Europe and the United States, and the Middle East, where the bank card holding rate and spending power are high, is not quite in line. So why is the Middle East an emerging market?In Payermax's view, the "emerging" of the Middle East lies in the fact that its penetration rate of online payment is still relatively low (its e-commerce cash on delivery ratio accounts for 70%-80% of the entire market), which is very different from the European and American markets.
This is also a basic judgment of Payermax for emerging markets, where the real opportunity for cross-border payments lies in how to move offline consumer behavior online, which is far greater than grabbing market share from competitors.
The reason why Payermax can expand its territory in different markets is not only due to its own deep cultivation, but also related to the increasing diversification of customer needs.
Our customers' sense of smell is far more sensitive than ours. ”
Liam said PayerMax currently has a sufficient sample of customers. Every time we get a new customer requirement, we first assess whether it is a special need or a general need of the industry. If there is enough representation in the industry, Payermax will lay out in advance, follow the footsteps of customers to open up new markets, and grow together with customers.
Payermax's global growth path is underpinned by a highly effective team with diverse backgrounds and cultures. In Liam's words, "We are always looking for people who have a similar 'taste', that is, people who have a strong consensus on building their own cross-border payment network." It's not just a simple blend of cultures. ”
People have always been regarded as Payermax's core asset and the cornerstone of its expansion. Here, everyone is expected to find their own value. On the other hand, the rapid development of Payermax has also given the team sufficient confidence and energy to meet challenges and overcome problems. "The growth of performance is the best chicken soup for the soul of employees, and the team that wins the battle is the most morale. Liam said.
It is understood that at present, Payermax's business has spread to 83 countries and regions around the world, such as Southeast Asia, the Middle East and Latin America, and has set up local offices in Singapore, Indonesia, Thailand, the Philippines, Malaysia, the United Arab Emirates, Saudi Arabia, Bahrain, Brazil, Chinese mainland, Hong Kong and other places. In the hot Middle East market, Payermax has been preparing for a rainy day since two years ago, and has set up a localized team composed of employees from eight countries: Saudi Arabia, Egypt, Lebanon, Syria, India, the United Kingdom, Pakistan and China, becoming the first Asian company to obtain a payment license in the United Arab Emirates, and the first Asian payment company to open a local independent office in Saudi Arabia.
Be patient enough to "be friends with time" and let Payermax finally take root in emerging markets.
In Payermax's Shanghai office, as soon as employees get out of the elevator, they can see the phrase printed on the company wall directly opposite: let customers get the most out of every minute and every penny.
Payermax has no intention of being a disruptor. The mission we define for ourselves is to be a stepping stone to achieve customers to move faster and more steadily. Liam said.
Today, the digital economy is sweeping the world, and emerging markets are accelerating the pace of digital transformation. According to the latest edition of the Southeast Asia Digital Economy Report, the era of cash being king is coming to an end, with digital payments reaching 50% of the total transaction size and are expected to continue to surpass cash payments in the futureIn the Middle East, innovative technology industries such as ICT, digital innovation infrastructure, and smart manufacturing are gradually replacing the traditional oil economy as the pillars of the Middle East's future developmentIn Latin America, according to Americas Market Intelligence**, Latin America's digital economy will grow by 25% between 2021 and 2025 and will be worth $700 billion.
As economist Richard Baldwin said in his book The Great Confluence, the ICT revolution is driving the reshaping of the global economic mapThe countries that have emerged in this round of information revolution will become the backbone of the process of economic globalization.
Under such opportunities, Chinese enterprises have rapidly expanded their territory in emerging markets with their strong digital infrastructure capabilities. Chinese cross-border payment companies will grow together with overseas enterprises, and help Chinese enterprises ride the wind and waves and compete in the world with solid localization capabilities and one-stop solutions.