Payment in Deep Water Areas: The Compliance Long March Behind the Trillion-Yuan Interest Rate Spread

Original Author: Sleepy.txt

The payment industry in China is undergoing an unprecedented reshuffle.

On one side, small and medium players are quietly exiting in batches. By the end of 2025, the central bank had revoked a total of 107 payment licenses, reducing the number of licensed institutions to 163, which is more than a 40% decrease from the industry's peak.

On the other side, leading institutions are recklessly expanding their territories without regard for costs. In 2025, Tencent's Tenpay underwent a business change, with its registered capital skyrocketing from 15.3 billion RMB to 22.3 billion RMB. Following closely, Douyin Pay and JD's Online Banking began raising hundreds of millions or even billions.

As profits in the existing market are squeezed to the limit and domestic regulatory red lines tighten, the only way out is to go overseas.

The reason giants are willing to spend heavily to migrate 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 rate for overseas cross-border payments often reaches 1.5% to 3%. Faced with this 3 to 5 times profit margin temptation, all capital eager for growth has no choice but to turn its gaze to the global market.

However, capturing this cake is no easy task; the overseas market is no longer the so-called blue ocean, but filled with stringent regulatory red lines and complex financial maneuvering. Going overseas in payments is a costly and protracted war.

Snatching Licenses, Buying Time

The first step into this blue ocean is to find a way to obtain an entry ticket.

Overseas payment licenses are the only ticket to enter the local settlement system. However, the cost of this ticket far exceeds expectations. The application fee is just the visible expense; the real burden comes from the capital occupation and opportunity cost during the lengthy review period.

Taking the U.S. market as an example, applying for a Money Transmission License (MTL) typically takes 12 to 18 months. The application fee, which can reach six figures in dollars, is just the tip of the iceberg; the real barrier is the extremely high capital occupation cost. In California and New York, for instance, the required deposits are as high as $500,000 and $1,000,000, respectively, while the application fees for individual states usually range in the thousands of dollars, and annual maintenance fees can vary by state, with some reaching tens of thousands of dollars. This cost is enough to drag down most growth-stage companies.

However, these costs can also transform into a company's moat. Once they survive the long period of bleeding, they can reap the huge dividends of business explosion.

Airwallex is a very typical example. Over the past decade, Airwallex has accumulated more than 80 payment licenses globally, and this early positioning finally paid off in 2025. In 2025, their annual recurring revenue (ARR) broke through the $1 billion mark. Notably, it took them a full 9 years to earn their first $500 million ARR, but the leap from $500 million to $1 billion took only 1 year.

Lianlian Digital also relied on accumulating licenses to achieve business explosion. With 66 global licenses in hand, Lianlian's total payment volume (TPV) in the first half of 2025 reached 198.5 billion RMB, a year-on-year increase of 94%.

Many capital giants with money but lacking patience often choose to spend money to buy time.

Payoneer spent nearly $80 million to acquire EasyLink Payments, essentially to buy a license. Later, Airwallex acquired Shunwei and Sunrate took over Chuanhua Payments, all for the same reason: to bypass the lengthy license approval period.

Since the cost of the entry ticket is already so high, can subsequent operational scale effects dilute the costs? The reality is probably far less optimistic than imagined.

Compliance Costs and Talent Scarcity

The compliance system is the foundation supporting global clearing and settlement, and it is also the heaviest hidden cost of going overseas in payments.

The first compliance hurdle for going overseas in payments is the Anti-Money Laundering (AML) and Know Your Customer (KYC) systems. Each time a company enters a new market, it must establish customer identity verification processes that comply with local regulations.

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

Building each compliance system requires investment in specialized legal, risk control, and technical teams, with costs often reaching millions of dollars. More troublesome is that compliance standards are not static. In 2025, the EU's Digital Operational Resilience Act (DORA) officially took effect, requiring all financial institutions to establish stricter cybersecurity and incident reporting mechanisms.

This means that payment companies must not only cope with existing rules but also continuously track, interpret, and implement new regulatory requirements. Each regulatory update can trigger a chain reaction of system renovations, process restructuring, and personnel training.

This pressure comes not only from overseas but also from domestic regulatory "retrospectives." Due to the sensitive nature of cross-border business involving capital outflows, domestic regulatory requirements for offshore compliance are tightening rapidly. In 2025, the domestic payment industry received about 75 fines, with total penalties exceeding 200 million RMB. Behind these fines, violations related to anti-money laundering have become a major disaster area.

Even more troubling than this visible loss is the talent gap supporting this system.

China is not short of a highly efficient army of internet talent, but there is a severe shortage of composite talents in the global financial compliance field. This scarcity has created a huge gap in the value of compliance talent compared to ordinary positions. In leading private enterprises in China, an annual salary of 1.5 million RMB is merely a starting point. If one looks towards more mature financial infrastructures in Hong Kong or the U.S., this figure can jump to over 2.5 million HKD or 350,000 USD.

Every additional profit earned by overseas companies comes at an additional cost in human leverage. The problem is, when companies finally pay the fare and obtain the ticket, what awaits them is truly a stable period of harvesting dividends?

The Tuition of Crossing Borders

Cross-border expeditions have never been cheap; all cross-border ambitions ultimately come with an extremely expensive toll.

Take Paytm, once dubbed the "Indian version of Alipay," as an example. After Ant Group invested approximately 336 billion rupees, it once held half of the Indian market. However, in January 2024, a ban from the Reserve Bank of India prohibited it from accepting deposits, conducting credit transactions, and cut off payment facilities, plunging it into the abyss.

The so-called ban is essentially India's rejection of Chinese capital. When a national-level financial tool bears a deep Chinese imprint, its rise in India becomes an intolerable original sin.

By August 2025, when Ant Group completely withdrew, its original investment loss reached 157 billion rupees (about 2 billion USD), and this also dealt a significant blow to Paytm, causing its revenue to plummet by 32.7% year-on-year.

Paytm's retreat serves as a reminder that, on the surface, it seems to be about settling accounts, but in reality, it is about setting rules. Whoever controls the payment channels holds the lifeblood of the business. Currently, Chinese manufacturing is in a "great maritime era," with new energy vehicles and smart home appliances rushing overseas. This mode of going overseas is essentially companies venturing into the world alone.

Unlike us, Japanese giants often go overseas with a complete trading company financial system. Companies like Mitsui and Mitsubishi not only sell cars but also control the entire funding chain from factories to retail through their internal financial subsidiaries and banking consortiums. When Japanese cars are sold in South America or Southeast Asia, these trading companies directly provide inventory financing to local dealers and offer highly competitive loans to consumers. This means that Japanese automakers control every financial gateway in the sales network.

In contrast, Chinese automakers' overseas ventures resemble running naked. Although the export scale reached 6.4 million vehicles in 2024, the financial support system still lacks significantly. Our automakers generally face issues of high financing costs and difficulty in receiving payments overseas. In markets like Russia or Iran, due to the lack of this full-chain financial control, once faced with exchange rate fluctuations or settlement sanctions, the payment chain can become instantly fragile.

Although China Export & Credit Insurance Corporation insured $17.5 billion in vehicle exports in 2024, facing a future target of exporting tens of millions of vehicles annually, relying solely on minor policy adjustments is clearly insufficient. Big businesses require big books; if Chinese automakers lack a financial service that truly understands the market and can manage global business accounts, no matter how big the steps taken, there will always be a sense of insecurity.

Since they have hit a wall in the deep waters of globalization rules, could finding a geopolitical safe haven become an effective bargaining chip for Chinese companies to gain growth space?

Fragmented Globalization

When doing business overseas, the real decisive factor often lies not in commercial competition but in those uncontrollable external rules.

What often kills an overseas payment company is not technological backwardness but a regulatory order from local authorities. For instance, in the context of increasingly complex Sino-Indian relations, even if Paytm has hundreds of millions of users in the Indian market, it is destined to become the most conspicuous target. The scrutiny faced by TikTok in the U.S. follows the same logic. As long as there are doubts about "data security," its payment business's closed loop can never truly be completed. This has become a rigid risk that cannot be completely avoided with money during the overseas process.

In this environment, Chinese companies are forced to adopt a "China +1" 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 gathering place in 2025. The relatively friendly political atmosphere in the UAE and its e-commerce potential exceeding $50 billion provide a rare buffer period for Chinese payment companies. By 2025, the number of active Chinese business members in Dubai has surpassed 6,190, collectively seeking offshore settlement solutions that can bypass the pressures of the traditional SWIFT system.

However, the so-called "safe haven" is also raising its thresholds day by day. Places like Vietnam are quickly tightening "origin washing" policies to avoid being embroiled in tariff troubles, strictly scrutinizing companies that merely want to change their labels to ship goods. This shift in direction is directly forcing a large number of payment and logistics companies to reselect locations, turning their attention to the Indonesian market, where policy maneuverability is greater.

According to McKinsey's 2025 report, the global payment landscape is disintegrating. For today's payment players, relying solely on products is no longer sufficient; they must also learn to dance with shackles, navigating the narrow survival space like walking a tightrope amid international politics.

Epilogue

Today's overseas payment ventures have moved past the stage of saving face. The real question now is no longer about studying interface interaction logic but about who has the capability to repair or even replace the outdated global financial pipeline.

In the competition of going overseas, the depth of pockets is essentially the tolerance for risk. When all those speculators looking to exploit loopholes and take shortcuts have exited the stage, the second half of overseas payments has become a test of endurance for the "honest people."

In the past, we were accustomed to "fast," used to leveraging model dividends to impact the old world. But now, we must get used to "slow," accustomed to building our credit assets brick by brick on the financial foundations of foreign lands.

For Chinese payment giants, going overseas is no longer a multiple-choice question but an expedition of life and death. There are no shortcuts on the road to going overseas; the most stable path is often the one that costs the most money and time. When every investment turns into solid compliance infrastructure, Chinese companies will finally no longer just be setting up stalls to sell goods in front of others' doors but will begin to have the ability to operate their own cash registers.