The Era of Industrial Payment · Industrial payment is a payment business model that payment institutions provide enterprises of different sizes and ... Internet finance, and transfer

The Era of Industrial Payment

2020 China’s Third-party Payment Industry Report

2©April 2020 iResearch Global Group www.iresearchchina.com

Definition and Differences Between Industrial Payment and

Personal PaymentIndustrial payment is a payment business model that payment institutions provide enterprises of different sizes and

industries with industrial solutions integrating payment, financial management, capital management, and marketing

services.

Industrial payment and personal payment are different in many aspects such as service targets, service content,

payment products, and key capabilities required for business development. The specific differences are shown in the

table below. The essential differences of the businesses result in different competitive landscapes in the industrial

payment and personal payment markets. While the personal payment market is oligarchic and reaching saturation, the

industrial payment market still has room for development.

Comparison of Industrial Payment and Personal Payment

Industrial Payment Personal Payment

Service targets ❑ Company ❑ Person

Service content

Provide companies of different sizes and in different industries with:

❑ Products and services such as payment and acquiring

❑ Industrial solution integrating payment, financial management, capital

management, marketing and other services

Provide personal users with：❑ Consumption payment services

❑ Derivative services such as lifestyle services

and financial services

Payment

products

❑ Online banking payment, payment gateway, fast payment, verified

payment, agreement payment, integrated payment, etc.

❑ POS、scanner, cash register and other acquire terminals❑ Personal APP

Key capabilities

❑ Business and channel capability

❑ Customization ability

❑ System and technology abilities

❑ Brand influence on specific area or industry

❑ Number and stickiness of users

❑ Breadth and depth covered by the scenario

❑ Diverse functions

❑ Subsidy capacity

❑ Extensive brand influence

Market

competition

❑ Incremental market still exists. The competition in stock market is fierce.

❑ Third-party payment institutions, banks and other players are competing

for market shares.

❑ The market is reaching saturation. Oligopolistic

competition is represented by Alipay and

Tenpay.

Source: iResearch Consulting Group.


Enter the Era of Industrial Payment

Industrial payment will be an important driver of the third-party mobile payment.

According to the main growth points, the development process of China's third-party mobile payment market can be

divided into three periods. The first period was from 2013 to 2017 and was driven by online scenarios. The successive

explosive growth of e-commerce, Internet finance, and transfer promoted the rapid growth of mobile payment. From

2017 to 2019 was the second period and it was driven by offline scenarios. The explosive growth of the offline QR code

payment started in 2017. The growth rate of payment in offline scenarios was much higher than that in online scenarios,

changing online-driven mobile payment to offline- driven. The third period started in 2019 and it is driven by industrial

payment. Online and offline payment driven by individual users started to grow steadily since the traffic was reaching the

peak. With the rapid rise of the industrial Internet, industrial payment has gradually become a new driver of mobile

payment in China.

Source: The data are based on interviews with experts and enterprises. The calculation is based on iResearch statistical model.

Transaction Scale of Third-party Mobile Payment in China From 2013 to 2020

Driven by e-

commerce

growth

Driven by growth

of internet

finance

Driven by growth of

transfer amount

Driven by offline QR code

paymentDriven by

industrial

payment

Driven by online

scenarios

Driven by offline

scenariosDriven by

industries

1.2 6.0 12.2

58.8

120.3

190.5 226.1

249.2

391.3%103.5%

381.9%104.7% 58.4% 18.7% 10.2%

2013 2014 2015 2016 2017 2018 2019 2020e

Transaction size (trillion yuan) % YoY growth rate


Payment Institutions Turn to Industries for Growth

Points

Alipay and Tenpay have absolute advantages. For other payment institutions,

turning to the industries for new incremental markets is the key to make

breakthroughs.

Alipay and Tenpay have now monopolized the third-party payment market. In 2019, the two giants accounted for 93.8%

of the mobile third-party payment market in China. In To C payment market, Alipay and Tenpay have absolute

advantages. For other payment institutions, turning to the industries for new incremental markets is the key to make

breakthroughs.

Alipay54.4%Tenpay

39.4%

1Qianbao1.5%

Jingdong Payment0.8%

UMFintech0.7%

99Bill0.6%

Yeepay0.5%

CHINAUMS0.4%

Suning Payment0.2%

Other1.5%

2019 Market Shares of Chinese Payment Institutions by the Scale of Third-party Mobile Payment Transactions

Source: The data are based on interviews with experts and enterprises. The calculation is based on iResearch statistical model.


Industrial Payment Ecology

Linkage and empowerment are the core functions of payment companies in the

industrial payment ecology.


User（To C）

Payment Companies

Merchant（To C） Industrial service providers（To B）Product or service

Personal users’ payment

methods

Facial

recognition

QR code

payment

OtherNFC

payment

Payment

Industrial services

Logistics and Supply

Chain Services

Marketing and

Customer Acquisition

Services

Financial and Loan

Services

Finance and Tax Cost

Control services

Big Data Services AI Services

Digital Middle-

platform Services

… …

Operation management service

Operation data statistics | Supplier

management | Stock management | ……

Marketing management services

Member management | User profile | Users’

comment | ……

Intelligent tool

Facial recognition | Intelligent hardware |

Front-end order entry | ……

Financial services

Small and micro loans | Acquiring services |

Account balance wealth management | ……

Personal users’ payment data

Produce

1, Accumulation of payment data

3. Help to link

industrial service

providers with

merchants

2. Empower

industrial service

providers based on

"data + technology"

4, Provide merchants with a whole

set of digital upgrade solution

Merchant digital upgrade Product or service

Payment

… …


Scale of Third-party Payment Market

The third-party payment market with a scale of over 100 trillion yuan will be

reshuffled.

The exploration boom of e-commerce business began around 2000 in China. The start of the e-commerce business

leads to merchants’ online collection need, providing third-party payment institutions with enterprise service opportunities.

After that, promoted by the internet boom, internet transformation of aviation, tourism, education, insurance, retail,

finance, logistics, people’s livelihood, and many other industries started. The online development of logistics flow, capital

flow and information flow has promoted online development of various industries’ payment methods. The complexity of

industries results in urgent demand for customized industrial solutions, which provides huge room for the third-party

payment institutions to develop industrial payment and brings huge challenges to practitioners of industrial payment. The

transformation from single payment service to digital upgrade services covering the whole industry chain has become an

inevitable development trend. The third-party industrial market with a scale of over 100 trillion yuan will be reshuffled.

Source: The data are based on public information and interviews with enterprises. The calculation is based on iResearch statistical model.

0.93 1.893.97

6.128.58

10.58 11.9614.00

15.8517.72

103.2% 110.1%54.2% 40.2% 23.3% 13.1% 17.0% 13.2% 11.8%

2013 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e

2013-2022 Transaction Scale of Third-party Industrial Payment in China

Transaction scale of industrial payment (bn yuan) % YoY growth rate


Industrial Payment Path of the To C Payment Giants

Service upgrade and refinement for merchants using QR code payment

Relying on the traffic advantages of their Apps, the To C payment giants gradually cultivated the personal users' habit of

QR code payment through subsidies in the early stage. The popularity of QR code payment helped the giants to reach a

large number of merchants using QR code. Centered on these merchants, the industrial payment path of To C payment

giants take payment services as a starting point for service upgrade and refinement, creates open platforms to provide

merchants in different industries with customized "payment +" solutions, thus to realize the transformation from payment

service providers to digital upgrade service providers.


MerchantUserPayment

Product or service

Cultivate the

personal users' habit

of QR code payment

To C payment

giants

Merchant payment service providers Merchant digital upgrade service providersTransform

Transformation and Upgrade of the To C Payment Giants in the Merchant Service Market

Based on payment services

Starting from the payment business,

providing digital upgrade services

covering the entire industry chain

centered on the needs of merchants

such as customer acquisition, logistics,

membership management, loans, and

insurance.

From providing standard

solutions for all kinds of

industries to providing

customized solutions targeting

the pain points of subdivided

industries.

Service

upgradeService

refinementConnect tens of

millions of

merchants via

QR codes


Industrial Payment Path of the To C Payment Giants

The To C payment giants will intensify competition in the merchant digital upgrade

service market

With traffic and ecological advantages, the To C payment giants will quickly increase their shares in the market of digital

upgrade service for merchants. However, the objective complexity of the To B service market makes it difficult for them to

monopolize as quickly as they did in the To C payment service market. Therefore, the competition in the merchant

service market will become fiercer. An industrial payment competition landscape with “two great players and many strong

players” formed by Alipay, Tenpay and other head payment companies, such as 1Qianbao, Bestpay, Suning Payment,

Suixingfu, 99bill, Baofu, Hebao Payment, and Lakala, will last for a long time.


To C Payment Giants’ Impact on the Merchant Service Market

Alipay and WeChat Payment are supported by Alibaba

ecology and Tencent ecology, respectively. When

helping merchants with their digital upgrade, the main

functions of the payment companies are linkage and

empowerment. Ecological advantages mainly helps To C

payment giants to link the ecological scenarios and

empower the cutting-edge technologies.

Ecological Advantages

The To C payment giants linked tens of millions of

merchants through QR code payment, completing the

traffic accumulation of the merchants. The traffic

advantages of the merchants provide a good basis for

the To C payment giants to enter the market of

merchant digital upgrade service.

Traffic Advantages The huge merchant groups have

three features, which are wide

geographical distribution, large

industry span, and high difference in

pain points. The complexity of the

merchant service market makes it

difficult for the To C payment giants

to monopolize as quickly as they did

in the To C payment service market.

Thus, the competitive landscape of

the industrial payment market will

have “two great players and many

strong players” for a long time.

Complexity of the Market

Intensify

competition in

the merchants

digital

upgrade

service market

Objective complexity of the To

B service market

To C Payment Giants Enter the Market

Fin

al re

su

lt


The Main Industrial Payment Scenarios that To B

Players are Involved inThe integration progress of third-party payment and industries depends on the time

and difficulty of the Internet transformation of a certain industryCurrently, the main industries that To B third-party payment institutions are involved in include e-commerce, retail, cross-

border trade, logistics, tourism, aviation, education, internet finance, insurance, digital entertainment, and public utilities.

For the industries mentioned above, the coverage process of industrial payment mainly depends on the time and

difficulty of the Internet transformation of a certain industry. For example, the industrial scenarios that are reached by

third-party payment in the early stage include the e-commerce industry with Internet genes and the aviation and tourism

industries that embraced the Internet in the early period. In recent years, industrial payment in cross-border, logistics and

retail scenarios has been booming. The third-party payment's value and impact on these industries will be discussed in

detail later.

Diverse payment productsE-commerce Retail

Cross-border

tradeLogistics

Tourism Aviation EducationInternet

finance

InsuranceDigital

entertainmentPublic

utilities

Government

payment

Th

e T

o B

Th

ird-p

arty

Pa

ym

en

t

Ins

titutio

ns

Customized solutions

Mature risk control system

Fund guarantee

Professional and efficient services…

Source： iResearch Consulting Group.

The Main Industrial Payment Scenarios that To B Players Are Involved in

10©April 2020 iResearch Global Group www.iresearchchina.com ©April 2020 iResearch Global Group www.iresearchchina.com

0.71.1

1.72.3

3.13.8

4.45.0

5.6

57.1% 54.5% 35.3% 34.8% 22.6% 15.8% 13.6% 12.0%

2013 2014 2015 2016 2017 2018 2019e 2020e 2021e

2013-2021 Size of China’s Cross-border Export Retail E-commerce Industry

Industry size (trillion yuan) % Growth rate

Scenario One: Cross-border Retail E-commerce

Payment

The payment scale grows with the development of cross-border retail e-

commerce, and its growth rate tend so be stable.

In the past few years, promoted by the “Belt and Road Initiative”, RMB internationalization and consumption upgrading, the

healthy and rapid development of cross-border e-commerce have received strong policy support. The continuously

growing market scale of cross-border import and export retail e-commerce provides a huge market potential for cross-

border payment business, and further drives the demand for cross-border payment in upstream and downstream

industries (such as warehousing and logistics). The demand side is booming but the supply side is facing fierce

competition. With the advantages of convenient cross-border collection and payment procedures, high speed, and flexible

response to the diverse dynamic needs of sellers and platforms, the third-party payment institutions have surpassed banks

and remittance companies and become the major player in the field of cross-border retail e-commerce payment.

Source: The data are based on public information and interviews with enterprises. The

research and charts are done by iResearch independently.

Source: The data are based on public information and interviews with enterprises. The

research and charts are done by iResearch independently.

5.98 14.6641.16

74.42111.34

161.33

218.27

282.44

355.59

145.3%180.8%80.8% 49.6% 44.9% 35.3% 29.4% 25.9%

2013 2014 2015 2016 2017 2018 2019e 2020e 2021e

2013-2021 Size of China’s Cross-border Import Retail E-commerce Industry

Industry size (billion yuan) % Growth rate


Scenario Two：Logistics Payment

The online development of information flow result in a logistics payment market

with a scale of over 100 billion yuan.

1.6168.81

217.29

375.08

477.72

581.57

4181.9%

215.8% 72.6% 27.4% 21.7%

2016 2017 2018 2019e 2020e 2021e

2016-2021 The Transaction Scale of To B Third-party Payment Institutions’ Logistics Payment

Transaction scale (billion yuan) % Growth rate

The operation method of the logistics industry is relatively traditional. Payment and settlement are mostly in cash in the

early period. With the integration by fourth-party logistics, the information flow is gradually developing online, resulting in

the development of online payment methods. Therefore, the combination of the logistics industry and third-party payment

is later than other industrial payment scenarios such as e-commerce. Before 2017, only a few head acquirers were

involved in logistics payment. In 2017, many third-party payment institutions entered the track of logistics payment.

Companies in the logistics industry get involved in logistics payment through acquiring payment licenses. The transaction

scale of logistics payment surged. In 2018, the transaction size of To B third-party payment institutions’ logistics payment

reached 217.29 billion yuan.

Note: Excluding the express services handled by large e-commerce platforms such as Taobao and JD, and the scale of personal transactions processed by third-party payment institutions;

Source: The data are from interviews with enterprises and experts. The calculation is based on iResearch statistical model. The research and chart are done by iResearch independently.


Scenario Three: Retail Payment

Retail payment is leading the de-media payment

With the promotion of facial recognition devices such as Dragonfly Payment, Frog Payment, and Lanjing Payment, face

scan payment began in 2019. As an upgrade of payment experience after QR code payment, the new intelligent

hardware used for face scan payment gradually appear on the cashier desk in various offline retail stores, changing the

operation and consumption forms of the retail industry. The popularity of face scan payment started “experience

economy” of the retail industry. The intelligent hardware that integrates payment, membership management, advertising,

marketing and SaaS services connects the retail stores with the strong ecology behind payment institutions, bringing

more imagine space for the intelligent operation of retail merchants through scenario transformation and service

innovation.

Payment Evolution and Assumptions

Integrated QR

code payment

Integrated face

scan payment

Integration of QR

code and face

scan payment



1. Intelligent payment

2. Online financing

3. Digital marketing

4. Digital management

The Pandemic Will Accelerate the Process of

Industrial PaymentThe offline customer acquisition channels are blocked by the COVID-19 pandemic.

Merchant digital upgrade is based on industrial payment service providers.

Because of the pandemic, the consumers need to stay at home for a long time. They make consumption through online

channels. Many merchants’ offline customer acquisition channels are blocked. Only a small number of merchants have

finished online + offline layout. Therefore, during the pandemic, a large number of merchants carry out digital upgrading

based on industrial payment service providers and demand for building online stores. iResearch believes that the

pandemic objectively accelerates merchant digital upgrade process. Industrial payment service providers with “payment+”

layout will have an opportunity for fast development.


Consumer Offline customer acquisition

Online customer acquisition

Stay at home Build cloud store

Online consumption

Logistics and delivery

Digitalization

Blo

ck

AccelerateStay at home

during the

pandemic

Merchant

Lead to

The Pandemic Will Accelerate the Process of Industrial Payment

Pandemic

14

Definition and Differences Between Industrial Payment and Personal Payment

Abstract

1 Development Background of China's Third-party Industrial Payment Market

1.1 Enter the Era of Industrial Payment

1.2 Third-party Payment is a Barometer of Internet Transformation

1.3 To C Traffic Has Peaked and Industrial Internet Concept is Proposed

1.4 Payment Institutions Turn to the Industries for Growth Points

1.5 Industrial Payment Ecology

1.6 Types of Players Involved in Third-party Payment

2 Status Quo of China's Third-party Industrial Payment Market

2.1 Third-party Industrial Payment Market Size

2.2 Development of Industrial Payment of To C Players

2.2.1 Development of Industrial Payment of To C Payment Giant

2.3 Development of Industrial Payment of To B Players

2.3.1 Industrial Payment Scenarios that To B Players Mainly Involved in

2.3.2 Scenario One: Cross-border Retail E-commerce Payment

2.3.3 Scenario Two: Logistics Payment

2.3.4 Scenario Three: Retail Payment

Table of Contents of the Full Report

15

3 Case Study of Third-party Payment Market in China

3.1 Alipay

3.2 1Qianbao

3.3 99Bill

3.4 Baofu

3.5 Suixingfu

3.6 BESTPAY

3.7 Suning Payment

3.8 Hebao Payment

3.9 Lakala

4 Development Trends of China’s Third-party Payment Market

4.1 The Pandemic Will Accelerate the Process of Industrial Payment

4.2 Science and Technology Promote Payment

4.3 Trend of Investment in Technology

Table of Contents of the Full Report

16

Company Introduction / Legal Notice

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services. It offers a wide range of services including big data insights and forecasts, industry research and corporate consulting,

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Founded in 2002, iResearch is the first third-party firm focusing on research in China’s internet sector. Since its inception, it has

published thousands of industry reports and provided custom research and consulting services to thousands of clients. It is now the

preferred third-party research brand for the IPO of Chinese internet companies. iResearch set up its global research center in 2015,

expanding the scope of research to fast-growing sectors world-wide.

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The Era of Industrial Payment · Industrial payment is a payment business model that payment institutions provide enterprises of different sizes and ... Internet finance, and transfer