Bank Card Acquiring Market Faces Continuous Differentiation Amid Institution Exits
The bank card acquiring market has entered an era of contraction.
Recently, the 20-year-old payment company, Card Friend Payment Service Co., Ltd. (hereinafter referred to as "Card Friend Payment"), announced its withdrawal from the payment acquiring market. This year, institutions including Card Friend Payment, Shanghai Huifu Payment Co., Ltd. (hereinafter referred to as "Huifu World"), and Shanghai Shenxin Electronic Payment Co., Ltd. (hereinafter referred to as "Shenxin Payment") have successively exited the bank card acquiring market.
"The bank card acquiring market, especially the market facing small and micro businesses, is indeed shrinking. The main reasons are the continuous strengthening of regulation, intensified market competition, insufficient innovation in technology and services, increased pressure from non-compliance and technology upgrades," said experts interviewed. For payment institutions engaged in offline small and micro acquiring businesses, the first priority is compliant operations; secondly, they need to cooperate with banks to develop and meet the diversified payment needs of small and micro users, and to stabilize and refine their positions in niche markets; additionally, digital services for businesses are a direction, and besides financial services, they can also provide a range of value-added services.
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The contraction of bank card acquiring business continues.
Even established payment companies are also exiting the payment acquiring market.
Recently, Card Friend Payment issued an announcement to suspend its payment business, stating that due to adjustments in the company's management decisions, in order to protect the interests of merchants and partners, it has decided to operate existing businesses until September 30, 2024. During this period, it will conduct a risk assessment of existing businesses and orderly exit and clean up those with potential risks. After September 30, Card Friend Payment will suspend the original card acquiring business for merchants, and due to the National Day holiday, the settlement work will end after all pending funds are settled before October 8.
Reporters learned that Card Friend Payment's "Card Easy Pay" APP had already issued an announcement at the end of August, stating that due to overall business adjustments of Card Friend Payment,扫码 merchants of "Card Easy Pay" will no longer support transactions from September 1, and reminded relevant agents to withdraw their profits as soon as possible before September 10, and to make arrangements for subsequent users.
Information shows that Card Friend Payment was established in 2003 and is one of the earlier financial payment service enterprises established in our country. As early as the beginning of 2003, Card Friend Payment launched telephone payment services in China; after the central bank officially released the third-party payment license in 2011, Card Friend Payment obtained the central bank's administrative permission in June 2012 and carried out bank card acquiring business nationwide.
Also at the end of August this year, Huifu World's POS machines prompted merchants: "Due to business adjustments, the equipment will be upgraded, and after the upgrade, all transactions and related data and information will be transferred to Kunpeng Payment, please authorize." Reporters learned from informed sources that Huifu World is gradually reducing its domestic bank card acquiring business and seeking to shift its business focus to digital services and other areas.
On May 20 of this year, another third-party payment institution, Shenxin Payment, announced on its official website: "Due to company operation issues, in order to protect the interests of merchants, it has decided to stop payment transaction business. Transactions will end at 11 pm on May 20, 2024, and settlement will end after settling the funds of the previous day on May 21, 2024."According to official website information, Shenxin Payment was established in February 2004 and obtained the "Payment Business License" issued by the People's Bank of China in 2012. Its business type is bank card acquiring, covering services such as POS acquiring, QR code collection, and smart parking, but its business coverage is limited to Shanghai only. In June 2023, Shenxin Payment successfully passed the renewal, extending the license validity period to June 2027.
Journalists have noticed that Shenxin Payment's official announcement to cease transaction business is mainly due to the debt dispute issues of its shareholders. Business information shows that Shanghai Heng Yuan Enterprise Development Co., Ltd. is the controlling shareholder of Shenxin Payment, holding 90.53% of the shares. Public information indicates that the actual controller of Shanghai Heng Yuan is Xu Guoliang, who was once the actual controller of Shanghai Shenxin Football Club. However, around 2020, following Xu Guoliang's voluntary exposure of disputes with former executives of Shanghai Bank, and the debt crisis of Shanghai Heng Yuan, the equity of its subsidiary Shenxin Payment was frozen and pledged. Currently, Shenxin Payment is still involved in multiple judicial disputes and has been listed as a dishonest executor by the Pudong New Area Court.
The payment acquiring market continues to differentiate.
As payment institutions successively exit the bank card acquiring business, what changes will the payment acquiring market undergo?
Su Xiaoli, a senior researcher at Su Xi Zhi Research, told reporters that at this stage, the bank card acquiring market, especially for small and micro businesses, is indeed in a state of contraction. However, looking at the specific model, the joint acquiring business, which is a collaboration between payment institutions and banking institutions, is on the rise. The driving factors behind this include, but are not limited to, the increasing operational and post-sales maintenance and warranty demands of banks for small and medium merchants, the severe "involution" of banks' own acquiring rates and subsidy allocations, the difficulty for banks' own acquiring to meet diverse clearing demands, and under the background of digital transformation, banks prefer payment partners with technical expertise in the acquiring field.
Su Xiaoli believes that the successive withdrawal of bank card acquiring business by multiple institutions is not only driven by strict regulation, such as the continuous emergence of large penalty orders targeting the acquiring field, and measures such as "suspending new" for institutions with low compliance, but also based on expectations and judgments of the business prospects. Looking at the semi-annual reports of listed payment companies, the decline in payment transaction volume and the "involution" of payment rates have become industry commonalities. At the same time, due to the low profits on the small and micro enterprise side, and some institutions with non-genuine business types being small and micro, payment institutions are currently inclined to shift their focus to large supermarkets and scaled enterprises with scenario advantages.
Wang Pengbo, a senior researcher in the financial industry at Broadcom Consulting, told reporters that the bank card acquiring market is indeed contracting, mainly due to the reduction in demand, with both merchant loan demands and user direct card consumption behaviors decreasing. The successive withdrawal of bank card acquiring business by some institutions is, on the one hand, due to the increased compliance threshold in the payment industry; on the other hand, bank card acquiring has entered the stock market, with both profit space and growth rate decreasing. In addition, factors such as digital transformation, reduction in acquiring regions, and involvement in equity disputes are also reasons for institutions to exit.
Xu Li, an associate professor at the Antai College of Economics and Management of Shanghai Jiao Tong University, analyzed for reporters that overall, the main reasons for some payment institutions to announce their withdrawal from the bank card acquiring business are the continuous strengthening of regulation, intensified market competition, insufficient technological and service innovation, increased cost pressure from violations and technological upgrades, affecting the survival and development of some payment institutions in the bank card acquiring business.
Xu Li said that in the bank card acquiring business, technological and service innovation is the key to enhancing competitiveness. With the change of business forms, payment is no longer just the transfer of money to complete a transaction; merchants need more integrated payment solutions. However, payment institutions have insufficient investment in technology and service innovation in the bank card acquiring business, unable to meet market demand changes, which puts these institutions at a disadvantage in competition. Secondly, compared to online business, bank card acquiring business requires a large amount of capital and human resources in system construction, merchant maintenance, risk control, etc. Some institutions, facing insufficient demand and cost control pressure, have no choice but to exit the bank card acquiring business to reduce the burden.
Wang Pengbo suggested that third-party payment institutions should improve compliance and focus on enterprise digital services. In addition to financial services, they can also provide a range of value-added services, such as marketing promotion, supply chain management, store management, etc.; they can also take on more barcode payment business volume to offset the decrease in bank card acquiring transactions; in addition, they can carry out more cooperation with banks, such as jointly expanding merchant resources.For third-party payment institutions engaged in acquiring services, Su Xiaorui believes that they should still make comprehensive decisions based on their own advantageous resource endowments and the sustainability of their business models. For some small merchants who are not profitable and even have higher compliance risks, abandoning this part of the business has become a consensus among some institutions. For institutions that insist on small and micro acquiring services, they can consider creating "payment+" industry solutions to provide more valuable comprehensive operation services for small and micro merchants; they can also seek cooperation with banks to improve service levels and merchant activity while reducing customer complaints; they can also seek cooperation with leading payment institutions and SaaS service providers to provide good service support for the business implementation and product iteration of partners.