Core Insights - The payment system is a crucial financial infrastructure that supports consumer spending and economic stability in China. The People's Bank of China (PBOC) has made significant advancements in the payment industry during the 14th Five-Year Plan period, establishing a modern payment system that ranks among the world's best [1][2]. Group 1: Development Achievements - The PBOC has achieved a series of breakthroughs, with the payment system processing business growing at an average annual rate of 12.52% over the past five years, making China's total business volume the second largest globally, projected to exceed 12 trillion yuan in 2024 [1]. - Mobile payment transactions are leading globally, with the number of transactions in 2024 expected to be 1.71 times that of 2020. The average payment service fee is below 0.6%, significantly lower than in Europe and the U.S. [1][2]. Group 2: Market Structure - The payment market has evolved into a multi-entity, collaborative structure, with the PBOC optimizing the roles of clearing institutions, commercial banks, payment institutions, and industry associations to provide diverse and efficient payment services [2]. - The China Payment and Clearing Association plays a self-regulatory role, maintaining fair competition and promoting high-quality development in the payment clearing industry [2]. Group 3: Regulatory Framework - The payment industry has entered a new phase of compliance and sustainable development, with the introduction of the "Non-Bank Payment Institutions Supervision and Management Regulations," marking a significant regulatory milestone [3]. - The PBOC employs both on-site inspections and off-site supervision to address illegal activities in the payment sector, focusing on risk prevention across the entire payment process [3]. Group 4: Service Accessibility - The payment service landscape has diversified, with non-cash payment transactions reaching 23 trillion in number and 22.6 trillion yuan in value, representing 2.34 times and 1.34 times the volume during the previous five-year period, respectively [4]. - Innovations such as facial recognition payments and enhanced services for the elderly have improved accessibility, bridging the digital divide and ensuring that payment services reach rural areas [4]. Group 5: Cross-Border Payment Developments - The PBOC is advancing the construction of a self-controlled cross-border payment system, with the Cross-Border Interbank Payment System (CIPS) processing 175 trillion yuan in cross-border RMB transactions in 2024, a 43% increase year-on-year [5][6]. - Efforts to enhance cross-border payment interoperability include the successful connection of rapid payment systems between mainland China and Hong Kong, facilitating real-time cross-border remittances [6]. Group 6: Foreign Personnel Payment Services - The PBOC has implemented measures to improve payment services for foreign personnel in China, allowing them to register for domestic mobile payment apps using foreign phone numbers and bind foreign bank cards [7]. - The number of active mobile payment users among inbound personnel exceeded 10 million in the first half of 2025, with transaction counts and amounts increasing by 162% and 149% year-on-year, respectively [7].

Core Insights - The payment system is a crucial financial infrastructure that supports consumer spending and economic stability in China. The system has seen significant advancements in recent years, providing secure, efficient, and convenient payment services that bolster the real economy [1] Group 1: Development Achievements - During the 14th Five-Year Plan period, the People's Bank of China has made substantial progress in building a modern payment system that ranks among the world's best. The payment system's business volume has grown at an average annual rate of 12.52%, with a total business volume expected to exceed 12 trillion yuan in 2024. Mobile payment transactions are projected to reach 1.71 times the volume of 2020 [2] - The average payment service fee is below 0.6%, significantly lower than that in Europe and the United States [2] Group 2: Market Structure - The payment market has evolved into a diverse and collaborative ecosystem, with the People's Bank of China optimizing the roles of clearing institutions, commercial banks, payment institutions, and industry associations to provide a wide range of payment services [3] - The China Payment and Clearing Association plays a self-regulatory role, ensuring fair competition and promoting high-quality development in the payment clearing industry [3] Group 3: Regulatory Framework - The payment industry is entering a new phase characterized by compliance and sustainable development. A comprehensive regulatory framework has been established, including the introduction of the first specialized regulation for non-bank payment institutions, marking a new stage in the industry's development [4] - The People's Bank of China has adopted a "zero tolerance" approach to illegal activities in the payment sector, focusing on risk prevention across the entire payment process [4] Group 4: Service Accessibility - The payment services have become more secure, convenient, and inclusive, with a diverse range of payment methods available to meet the public's needs. Since the beginning of the 14th Five-Year Plan, non-cash payment transactions have reached 23 trillion, representing a 2.34-fold increase in volume compared to the previous five years [5] - The rapid adoption of mobile payment services has transformed various transaction scenarios, bridging the digital divide for the elderly and enhancing payment services in rural areas [5] Group 5: Cross-Border Payment Progress - The People's Bank of China is actively promoting the construction of a self-controlled cross-border payment system, with the Cross-Border Interbank Payment System (CIPS) processing 175 trillion yuan in cross-border RMB transactions in 2024, a 43% increase year-on-year [6][7] - The establishment of a cross-border payment platform for digital currencies has been initiated in collaboration with central banks from Hong Kong, Thailand, and the UAE [7] Group 6: Enhancing Foreign Payment Services - The People's Bank of China has implemented measures to improve payment services for foreign nationals in China, including allowing the use of foreign mobile numbers to register for domestic payment apps and enhancing payment guides at key locations [8] - As a result, the number of active mobile payment users among inbound travelers exceeded 10 million in the first half of 2025, with transaction volumes and amounts increasing by 162% and 149%, respectively [8]

Core Viewpoint - The 2024 annual monitoring report of China's third-party internet payment market reveals that the top five institutions dominate 76.5% of the market share, while around 160 small and medium-sized payment institutions face severe survival challenges [3][5]. Group 1: Industry Restructuring - The implementation of the "Non-Bank Payment Institution Supervision and Management Regulations" in 2024 has significantly altered the survival rules of the industry, raising the registered capital threshold to 100 million yuan and linking net assets to reserve funds [8]. - Major players like Tenpay and Ping An Pay have initiated a capital arms race, with Tenpay increasing its registered capital from 1 billion yuan to 15.3 billion yuan [9]. - The regulatory environment has led to a redefinition of industry boundaries, with many small institutions being acquired due to a lack of capital support [9][10]. Group 2: Compliance and Cost Challenges - The compliance costs for small payment institutions are rising, with the upcoming Anti-Money Laundering Law in 2025 imposing dual penalties on institutions and individuals for violations [10]. - Some small institutions are struggling to manage compliance costs while facing competition from larger players, leading to a contraction in their market presence [10][11]. - Despite regulatory pressures, some institutions continue to engage in risky practices, such as facilitating illegal transactions, which has resulted in increased penalties [11]. Group 3: Niche Markets and International Expansion - As major players engage in subsidy wars in the consumer market, many small payment institutions are focusing on niche markets and international expansion to survive [12]. - Institutions with backing from larger corporations are leveraging their parent companies' resources, while those without are concentrating on specific consumer scenarios [13][14]. - The cross-border payment sector is experiencing explosive growth, with institutions like Lianlian Pay and Wanlihui targeting different segments of the market [16][17]. Group 4: Market Consolidation and Future Outlook - The performance of nine listed payment institutions in 2024 shows a decline in revenue, with Haike Rongtong experiencing a 46.19% drop [19]. - The ongoing trend of market consolidation is driven by increased regulatory requirements, competitive barriers from major platforms, and disparities in technological investment [20]. - The market is expected to stabilize into a "dual super, many strong" structure, with Alipay and WeChat Pay maintaining a combined market share of 85-90% in the consumer market [21].