Recently, the “Economic Information Daily” of Xinhua News Agency and Visa jointly issued the “China Cross-border Consumption Annual Index Report (2017)”, in which the important role of cross-border electronic payments in promoting cross-border economic activities has been fully reflected.

New technologies play a major role in the development of the payment industry

At present, with the emergence of various new payment tools, payment has become more and more closely linked with people’s lives. In particular, it is worthy mentioning that the innovation of payment methods based on mobile technology has had a very profound impact on individual trading behavior and socio-economic operations.

The improvement of payment efficiency and payment security guarantee has an important role in promoting the efficiency of consumer transactions; new payment experiences, including novel payment culture attempts, are also conducive to stimulating young people’s consumption behavior; and relying on payment channels, Both consumer credit support, additional financial services and other payment-related convenience value-added services are also very important for promoting consumption. Alipay and other payment platforms solve the credit termination guarantee problem in the B2C development process to some extent. This kind of consumer credit support function will also promote resident consumption to a certain extent; but for mining big data consumption, it can not only derive more. This kind of business model has very important reference value for analyzing consumer behavior and the formulation of national industrial policies.

Looking forward to the future, new technologies will have a full impact on the payment and settlement infrastructure, including payment instruments, transaction models, clearing and settlement procedures, payment intermediation and organization, payment account systems, and regulatory policies. The new technology is also developing innovative payment forms at the tool level, including general contactless payment, smart wearable device payment, and biometrics technology payment. The newly emerged innovation and vision of the “no payment” method combine personal biometric identification with cloud computing and other technologies, eliminating the need for identification of personal identities, accounts, and credit levels at the intermediate stage, eliminating the payment carrier, and directly completing pay, such as Amazon Go, launched by Amazon in late 2016. Payments have some common characteristics in the path of innovation, that is, around payment security, developing new technologies that are free from traditional tangible identities and funding certification carriers, making payments safer, faster, more efficient, and free from external carriers. Constraints with the intermediary greatly reduce transaction costs in the payment process.

In general, payment innovation can help to further promote the de-cash of payments, save social costs, promote the development of the Internet economy and e-commerce, reconstruct the financial transaction process and integrate financial services functions.

In the construction of cross-border payment systems, more challenges and problems are often faced. In theory, we can use the new technology to solve the difficulties of the existing payment system, including: further reduce complexity (especially involving multiple participants across the bank, cross-border transactions), improve end-to-end transaction speeds and assets effectiveness, reducing communication costs for holders of multiple transaction records, improving the transparency and invariability of transaction records, improving network flexibility through improved data management, and reducing operational and financial risks.

Cross-border payment opportunities and challenges

Strictly speaking, the development of a cross-border payment system should include three levels. The first is the cross-border development of securities clearing and settlement systems. The open exploration of Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, and Bond-linked financial markets, they are essentially inseparable from the internationalization arrangements of the securities clearing mechanism; the second is the cross-border development of the large-sum payment clearing system. It used to be the RMB clearing bank, the agent bank model, or the RMB NRA account. Now it is a RMB cross-border payment system ( CIPS) is the focus; the third is the cross-border development of small retail sales.

Because it is closely related to people’s daily lives, and the public is very concerned about the innovation of cross-border payment for third-party payment, it is often said that cross-border payment refers to the portion of small retail sales. It is precisely because small-scale cross-border payment services are more likely to become the focus of new technology because of many links, long processes, high costs, complicated procedures, low efficiency, and low penetration rate.

With the advancement of new payment technologies and the popularization of small-sum cross-border payment services, there are new opportunities and challenges in cross-border payment. To sum up, the most prominent opportunity for cross-border retail payment is reflected in the cross-border movement of overseas students, tourism, and labor services, and the rapid increase in the demand for small-scale cross-border remittances; the rapid development of cross-border e-commerce and “going out”, with the increase in the degree of two-way opening of “introduction”, the demand for cross-border payment services has been continuously increasing; and new technologies have improved the original cross-border payment efficiency and cost constraints, providing convenience for cross-border business.

At the same time, cross-border payments also face some outstanding challenges. Including: the authenticity of transactions to identify risks, money laundering and illegal liquidity risk, risk management of preparedness funds, risk of evading personal restrictions on the sale and purchase of foreign exchange, the monitoring of the international balance of payments reporting management risk, and how to effectively protect customer personal information security issues. In addition, the emergence of more cross-border payment instruments will inevitably lead to the preemption of users and customer resources in the cross-border payment market. At present, this competitive situation has fully emerged through the price war of withdrawal rate. How to jump out of low-level price competition and create a true service value chain is very important for financial institutions and payment companies. It should be said that under the online connection, the platform model plus refined services will become an important part of the cross-border payment competition that should be improved.

（Source：Zhongxin Jingwei APP    Author：Yang Tao ）

Member Profile: Yang Tao, Assistant Director of Finance Institute of Chinese Academy of Social Sciences; Director of Industrial Finance Research Base; Director of Payment and Clearing Center.

Beijing Blockchain Application Association

October 9, 2017