How cross border payment companies can enter China

How Chinese pay by scanning QR code
  1. China is a very tough market to enter for cross border payments companies, but for those who can crack the puzzle, it can also be very lucrative
  2. Before jumping in, one should have a clear view of: 1. market competition, 2. customer segment, 3. value proposition, 4. distribution, 5. and regulation


My previous article, international payment paint points and solution, has explained that cross border payment is ripe for disruption despite current advances. Today we will look at the biggest market for cross border payment, China. Having worked in fintech in both China and USA, I have been asked on how should foreign payment companies enter China? In this article we will look into: why China, my analysis framework, the challenges, and template for go to market strategy for foreign payment companies.

Why China

First, why China? In short, it’s the biggest market for cross-border payment. China is the largest in cross-border remittance if counting both inbound and outbound.

My framework

The analysis framework I typically use to answer “how should payment company enter China?” is:

  • market competition
  • customer segments
  • value proposition
  • distribution
  • regulation
My initial analysis framework

Market competition

For payment, China is a very competitive market. the domestic payment is dominated by 2 tech giant Alipay and Wechat pay. These 2 account for more than 90% of the payment in China. International payments is also very competitive. However, there still are opportunities in partnership and pockets that hasn’t been fully explored yet. For example, Flywire found such pocket in tuition payment for Chinese students studying abroad. In general, understanding market competition is an important first step to formulate market entry strategy.

Customer segments

It’s important for cross border payment companies to find the right segment for product market fit. To break down cross border payment, first there is inbound vs outbound (sending money in vs sending money out). To start, companies should focus on one direction, then focus on a specific use case that has true pain points. The use case may be an industry, specific country, or particular user demographics.

Value proposition

For the next step, we need to make sure the customer segment is best matched to our products’ value proposition. Basically, our product needs to be one of, if not the best, solution to the pain points identified. Foreign new entrants should definitely leverage its brand and international network, but that’s not going to be enough. Unless the market is still fairly new and unsaturated, a new entrant providing similar functions or value proposition to incumbent is a hard sell.


Unless you are a very well known international brand, customer acquisition cost is expensive especially for financial. Because getting potential customers to trust you is hard. Getting users to abandon their existing offerings (muscle memory switch) , and to try yours is even harder. This is why instead of going direct to market, most of the foreign payment companies partner with local companies for distribution.


One of the major barrier to entry in finance is regulation. China is definitely not one of the more open countries in terms of granting financial license to foreign companies, especially in payments. This is another reason why foreign companies often partner with local companies.

Why so challenging?

So, why is China so hard to enter for foreign payment companies?

Chinese customers have a number of payment options

Market Entry Template

After apply my framework for initial analysis, I use this template to further drill down and help payment companies formulate their China entry strategy. For the purpose of this article, I have modified the template to be a bit more generic:

  1. The inbound market is much larger. For remittance it was ~$60 billion inbound vs $15 billion outbound based on 2019 data.
  2. Foreign companies are more likely to leverage their existing resources from their current operation. My assumption is that these companies are well established in their home country or countries.
  3. I view inbound as a bridge to establish the brand with people of the country (China in this case) and establish local partnership without spending the cost and efforts of a full physical operation in China.
  4. The success of inbound can then help pave the way to set up outbound, which is a lot more complicated in regulation, operation, marketing, and partnership.


Within inbound, I would further break down on business focus. For example, remittance vs cross-border online seller as the customers for both are different. In remittance, I would focus on specific countries as inbound remittance to China is mostly composed of the following 4 countries: Australia, Singapore, USA, Canada. It’s better that there is a match between these countries to the companies’ existing footprint as we need to leverage every existing resources.


As for outbound, note the outbound market is much smaller, and much harder to set up due to regulation, so know why you are going after it.


China is a tough market to enter, tougher for finance, and even tougher for payments. However, for the ones who are able to crack the puzzle, the reward will more than compensate the efforts. Otherwise, companies like Paypal wouldn’t have waited for nearly 20 years for its license. And the good new is that there are a number of payment companies who have done it. From Western Union, Paypal, to more recently Payoneer and Airwallex. In the following articles, I will do a deep dive on some of those companies to get a better view of how these companies are able to crack the China puzzle.



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Ming-Chieh Lee

Ming-Chieh Lee


passion for #fintech #payments #RTP real time payment #Banking as a Service #digital strategy #blockchain