Foreign third-party payment institutions are one step closer to entering the Chinese market, after the central bank publicized the application of the country's first third-party payment license covering internet and mobile phone payment for foreign companies on its website.
But observers warned that the foreign newcomers' business in the market may not translate to desired outcomes, as the country's third-party payment has been monopolized by Alipay and Tenpay, leaving just a small yet fiercely competitive market niche for them to explore.
The Global Times saw that information regarding the application for the third-party payment license of Yuefan Business Conulsting Co (Shanghai), wholly owned by UK-based international payment company World First Asia, was posted on the website of the People's Bank of China (PBOC), the central bank, last Friday.
The company, with a registered capital of $14.64 million, would become the first large-scale, foreign-funded third-party payment institution in the country if the license is awarded.
The license would also be an important step in China's financial opening-up, industry insiders said.
In March, the PBOC announced it would open up the country's $27 trillion third-party payment market to foreign companies, which will operate under the same rules and supervision requirements as domestic counterparts.
World First Asia was the first foreign applicant for a third-party payment license in May.
Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times on Tuesday that foreign players, due to a late start, may run into hurdles when launching third-party payment service in China.
"Chinese regulators have so far issued about 270 third-party licenses to domestic institutions, yet about 80 percent to 90 percent of the market shares are in the hands of two digital payment platforms - [Alibaba's] Alipay and [Tencent's] Tenpay," Dong said.
Foreign institutions have to compete fiercely with other domestic rivals for the remaining 10 percent to 20 percent market share.
A more pressing issue for latecomers like Yuefan is how to build an ecosystem within its service, like Alipay and Tenpay, that can attract and retain consumers, Dong pointed out.
But he noted that taking account of the relatively high internationalization standard of foreign payment institutions, potential opportunities in the Chinese market also lie in cross-border payment as well as services that targeted companies rather than individual consumers.
It is estimated that China's cross-border business-to-business transactions will reach $1.24 trillion by 2020, according to a report by research firm Accenture.