Article | Sleepy.txt

China's payment industry is undergoing an unprecedented reshuffle.

On one side, small and medium-sized players are exiting in large numbers. By the end of 2025, the central bank had canceled a total of 107 payment licenses, reducing the remaining licensed institutions to 163, more than a 40% decrease from the industry's peak.

On the other side, major institutions are aggressively expanding at all costs. In 2025, Tencent's WeChat Pay completed a business registration change, increasing its registered capital from 15.3 billion yuan to 22.3 billion yuan. Shortly after, Douyin Pay and JD's Netbank Online successively engaged in capital increases in the hundreds of millions or even billions.

As the profits in the existing market have been squeezed to the limit, domestic regulatory red lines are tightening. The only way out is to go overseas.

The reason the giants are willing to spend heavily to expand overseas is that profits in the domestic market have become razor-thin. Domestic payment rates have long hovered between 0.3% and 0.6%, while the average cross-border payment rate overseas is often between 1.5% and 3%. Faced with the temptation of this 3 to 5 times profit differential, all capital eager for growth has no choice but to look to the global market.

However, capturing this opportunity is no easy task. The overseas market is no longer the so-called blue ocean; it is full of strict regulatory red lines and complex financial struggles. Expanding payment services overseas is a costly, protracted war.

Grab Licenses, Buy Time

The first step to enter this blue ocean is to find a way to obtain an entry pass.

An overseas payment license is the only ticket to entering the local settlement system. However, the cost of this ticket far exceeds imagination. The application fee is just the visible expense; the real cost lies in the prolonged capital lock-up and opportunity cost due to the extensive approval process.

Take the U.S. market, for example. The typical period to apply for a Money Transmitter License (MTL) is between 12 to 18 months. The application fee, which can reach six figures, is only the tip of the iceberg. The real hurdle is the significant capital lock-up cost. In states like California and New York, the security deposits are as high as $500,000 and $1 million, respectively. Application fees in a single state are usually in the thousands of dollars, while annual maintenance fees vary by state, with some reaching tens of thousands of dollars. These costs are enough to cripple most growth-stage companies.

However, these costs also become the moat of the enterprise. Once through the long period of financial strain, the business will enjoy a huge dividend from the explosive growth.

AirGap Cloud Payment is a very typical example. Over the past decade, AirGap Cloud Payment has accumulated over 80 payment licenses worldwide. This early ambush finally paid off in 2025 when their Annual Recurring Revenue (ARR) surpassed the $1 billion mark. It is noteworthy that it took them a full 9 years to earn the first $500 million in ARR, but the leap from $500 million to $1 billion only took 1 year.

Ditto Digital is another player that leveraged licenses to drive business growth. With 66 global licenses in hand, Ditto Digital achieved a total payment volume (TPV) of 198.5 billion USD in the first half of 2025, a staggering 94% year-over-year increase.

Many capital giants with deep pockets but little patience often choose to spend money to buy time.

Payoneer once spent nearly $80 million to acquire EasyLink Payment, essentially buying a license. Later, Airwallex acquired Commerce Payments, Sunrate for Extravel Payment, and Hupay Payment for the same reason—to bypass the lengthy license approval process.

Since the cost of entry tickets is already so high, can the cost be diluted through the economies of scale in subsequent operations? The reality is probably far less optimistic than imagined.

Compliance Costs and Talent Scarcity

The compliance system is the foundation supporting global settlement and also the heaviest hidden cost of cross-border payments.

The first compliance checkpoint for cross-border payments is the Anti-Money Laundering (AML) and Know Your Customer (KYC) system. Every time a company enters a new market, it must establish customer identity verification processes that comply with local regulations.

In the EU, this means complying with the General Data Protection Regulation (GDPR) and the 5th Anti-Money Laundering Directive (5AMLD); in the U.S., it requires meeting the Bank Secrecy Act (BSA) and Financial Crimes Enforcement Network (FinCEN) requirements.

Building each set of compliance systems requires dedicated legal, risk control, and technical teams, with costs often running into the millions of dollars. What's even trickier is that compliance standards are not set in stone. In 2025, the EU's Digital Operational Resilience Act (DORA) officially came into effect, requiring all financial institutions to establish stricter cybersecurity and incident reporting mechanisms.

This means that payment companies not only have to deal with existing rules but also continuously track, interpret, and implement new regulatory requirements. Each regulatory update could trigger a chain reaction of system overhauls, process reengineering, and staff training.

This pressure is not only coming from overseas but also from domestic regulatory retrospection. As cross-border transactions involve sensitive fund outflows, domestic regulators are rapidly tightening the requirements for offshore compliance. In 2025, the domestic payment industry received about 75 penalties, with a total fine exceeding 200 million yuan. Behind these fines, the three types of anti-money laundering violations have become the hardest hit areas.

More troubling for businesses than this explicit loss is the talent gap that underpins this system.

China is not lacking in a highly efficient army of internet talent, but there is indeed an extreme scarcity of talent with a composite skill set in the global financial compliance field. This scarcity has created a huge disparity in the value of compliance talent compared to ordinary positions. In top domestic private enterprises, an annual salary of 1.5 million RMB is just a stepping stone. However, if you look to more developed financial infrastructures like Hong Kong or the United States, this number can jump to over 2.5 million HKD or 350,000 USD.

For every additional unit of profit that outbound companies gain, they have to pay an additional unit in terms of human leverage. The issue lies in the fact that when a company finally pays the toll and obtains the ticket, is the smooth harvesting of dividends really what awaits them?

The Tuition Fee of Going Global

A cross-border expedition has never been cheap. All cross-border ambitions ultimately require paying a very expensive toll.

Take Paytm, once known as the "Indian version of Alipay," for example. After receiving an investment of about 3.36 trillion rupees from the Ant Group, this company once dominated the Indian market. However, in January 2024, a ban by the Reserve Bank of India prohibiting it from accepting deposits, engaging in credit transactions, and cutting off its payment facilities plunged it into the abyss.

In the end, the so-called ban was actually India's rejection of Chinese capital. When a national-level financial instrument bears a deep Chinese imprint, its rise on the Indian stage itself became an intolerable original sin.

By August 2025, when the Ant Group completely withdrew, the loss from its initial investment amounted to a staggering 1.57 trillion rupees (about 20 billion USD), and Paytm itself suffered a massive blow, leading to a 32.7% year-on-year drop in revenue.

Paytm's retreat reminds us that while it seems to settle the account, it is actually establishing rules. Whoever controls the payment channel holds the key to business. Currently, Chinese manufacturing is in the "Age of Discovery," with new energy vehicles and smart home appliances rushing overseas in full force. This outbound model essentially means that companies are venturing out into the world alone.

What sets us apart is that Japanese giants often go abroad with a set of trading house financial systems. Companies like Mitsui and Mitsubishi not only sell cars but also, through internal affiliated financial companies and banking consortia, control the full chain of funds from the factory to the retail end. When Japanese cars are sold in South America or Southeast Asia, these trading houses directly provide inventory financing to local dealers and offer consumers highly competitive loans. This means that Japanese automakers control every financial gateway in the sales network.

In contrast, the overseas expansion of Chinese automakers is more like running naked. Although the export scale has reached 6.4 million vehicles in 2024, there is still a lack of financial support system. Our automakers generally face the problems of expensive financing and difficult payment collection overseas. In markets like Russia or Iran, due to the lack of this kind of end-to-end financial control, the payment collection chain becomes instantly fragile when facing exchange rate fluctuations or settlement sanctions.

Although China Export & Credit Insurance Corporation (SINOSURE) underwrote $17.5 billion in whole-vehicle exports in 2024, facing the future annual target of tens of millions of vehicles going overseas, relying solely on some minor policy adjustments is clearly no longer sufficient. Big business needs a big ledger. If Chinese automakers do not have a set of financial services behind them that truly understand the market and can manage the global business accounts well, then no matter how big the steps they take, they will still feel insecure.

Since hitting a wall in the deep end of globalization rules, could finding a geopolitical safe haven become an effective bargaining chip for Chinese companies to exchange for growth space?

Fragmented Globalization

When doing business overseas, the real winner or loser is often not in commercial competition, but in those uncontrollable external rules.

What often kills an overseas payment company is not technological backwardness, but a local regulatory agency's decree. Take Paytm as an example. Against the increasingly complex backdrop of China-India relations, even though Paytm has hundreds of millions of users in the Indian market, it is destined to be the most prominent target. The scrutiny faced by TikTok in the United States follows the same logic. As long as there is a question of "data security," the closed-loop of its payment business can never truly be completed. This has become a rigid risk in the overseas process that cannot be completely avoided with money.

In this environment, Chinese companies are forced to adopt a "China Plus One" survival strategy, retaining their core base in China while dispersing key supply chains and clearing paths to regions with lower geopolitical risks.

This explains why the Middle East became a capital hub in 2025. The relatively friendly political environment in the UAE and an e-commerce potential of over $50 billion provide Chinese payment companies with a rare buffer period. As of 2025, the active Chinese corporate members in Dubai have exceeded 6,190, collectively seeking an offshore settlement solution that can bypass the traditional SWIFT system pressure.

However, the so-called "safe haven" is also raising its threshold day by day. Places like Vietnam are rapidly tightening the "origin labeling" policy to avoid tariff troubles, scrutinizing enterprises that only want to change the label and ship out. This shift in direction is directly forcing a large number of payment and logistics companies to relocate and turn their attention to the Indonesian market, which has greater policy flexibility.

According to the McKinsey 2025 report, the global payment landscape is undergoing fragmentation. For today's payment players, relying solely on a good product is no longer sufficient. You must also learn to dance in shackles, navigate between international politics, and seek out that extremely limited space for survival as if walking a tightrope.

Epilogue

Today, expanding payment services globally has moved beyond merely saving face. The true challenge now is not studying interface interaction logic but rather determining who has the ability to patch up or even replace the outdated global financial plumbing.

In the battle of global expansion, the depth of your pockets actually represents your risk tolerance. As all the speculators looking to cut corners and take shortcuts exit the stage, the latter half of international payment has evolved into an endurance race for the "honest players."

We used to be accustomed to speed, relying on the dividend of established patterns to disrupt the old world. But now, we must embrace slowness, gradually building our credit assets in the financial foundation of a foreign land, brick by brick.

For Chinese payment giants, global expansion is no longer a matter of choice but a fight for survival. There are no shortcuts in this journey, and the most stable path often turns out to be the most expensive and time-consuming. Only when every investment transforms into a solid compliance infrastructure can Chinese enterprises finally move beyond setting up stalls in front of others' doors and begin to operate their own cash register.

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