2021年10月26日

Once claimed that “will not apply for payment license”, why does Huawei buy the third-party payment license?

Journalist Xin Jizhao

After Xiaomi, Huawei became the second handset maker to get a third-party payment license.

On March 29, tech giant Huawei recently acquired a wholly-owned stake in Shenzhen SmartPay, the third party payment license. Previously, Alibaba, Tencent, Suning, Jingdong, Baidu, Sina, Meituan, Vipshop, Pinduoduo and other hands hold payment licenses.

On the same day, Huawei responded to the media that it hoped to provide consumers with richer digital life services and create safer and more convenient all-scene intelligent experience for consumers through the acquisition.

In this regard, insiders interviewed by the 21st Century Business Herald said that Huawei’s acquisition of the payment license should first be based on regulatory compliance considerations, and then expand its business on the basis of compliance.

On the one hand, the APP clears the funds, and the platform receives the money and then distributes it. On the other hand, to serve its own ecosystem, Huawei is developing its own ecosystem, and the monthly active users of its app market AppGallery have exceeded 530 million.

Technology giant Huawei recently bought a wholly-owned stake in Shenzhen SmartPay on March 29, becoming the first mobile phone manufacturer to have a third-party payment license after Xiaomi.

“I have not found a suitable application scenario, and payment can only be attached to the scene to have value, to form a scale effect, otherwise no matter how strong the shareholder background is, it is not significant.” A card tong company insider told reporters. The shares of Smart Pay changed hands, and it was subordinated to “star” shareholders such as ZTE and CSI.

According to the central bank’s announcement, SmartPay has the qualifications for Internet payment and mobile phone payment, and the payment license will be valid until July 2024. Wang Guanrong, the legal representative of Smart Pay, formerly served as Deputy Director General of the Payment and Settlement Department of the head office of the People’s Bank of China and Deputy Governor of Shanghai Rural Commercial Bank.

Huawei, the latest company to take over SmartPay, is China’s No. 1 handset maker. Huawei shipped 123.3 million smartphones in China in 2020, down 13 per cent from the previous year, according to Canalys, but it has held the top spot since 2018.

Huawei Wallet App is pre-installed on its smartphones and is considered to be highly imaginative in the market. Before this, Huawei’s management has repeatedly declared that it will not apply for a payment license and that an enterprise should have a sense of boundary.

Previously, a number of analysts told the media that Huawei’s purchase of the payment license is not only aimed at the payment business, but also Huawei Wallet and the whole financial services ecosystem behind it. Huawei has a natural flow entrance and can build consumer finance business with payment service as the fulcrum.

However, industry insiders interviewed by the 21st Century Business Herald said that Huawei’s acquisition of the payment license should first be based on regulatory compliance and then expand its business on the basis of compliance.

“It is mainly APP in-app payments. If the funds are cleared for the APP, it is suspected of ‘second clearing’. There is nothing wrong with the payment itself, but it is suspected of ‘double clearing’ when the platform receives the money and then distributes it.” A senior payment industry insider said that only the expansion of financial business is not so quick to profit, general third-party payment and other institutions are very difficult to survive.

Another Shenzhen-based payment industry insider said that Huawei had considered a variety of solutions for the payment business, including the lack of financial business experience, it once considered the cooperation with a third-party payment agency to operate the payment business, but the final plan was to acquire the payment license and operate the payment business independently.

The so-called “two clear” is a kind of payment business without a license. In the Notice on Further Strengthening the Improvement of the Payment Business without a Certificate issued by the People’s Bank of China in 2017, “second clearing” is defined as the mode of platform connection or “large merchant”, in which customer funds are first transferred to the network platform and then settled by the network platform to the second-level merchant of the platform.

Regulators have repeatedly stressed since last year that finance is a licensed industry that must operate under a licence. Fan Yifei, deputy governor of the central bank, has said that payment business is a financial business and must be licensed to operate under supervision.

Mobile phone manufacturers into mobile payment, started in 2016. In that year, following Apple Pay and Samsung Pay, Huawei and Xiaomi, two domestic mobile phone manufacturers, successively launched mobile payment services with China UnionPay and dozens of banks. Since then, Xiaomi, Oppo, Vivo three mobile phone manufacturers busy into the financial, Huawei has been quiet.

Mobile phone manufacturers mainly cooperate with financial institutions through the wallet APP pre-installed in their mobile phones. For example, Vivo, Oppo and other mobile phone manufacturers rely on the built-in wallet APP to provide financial services including loans, financial management, payment, insurance, etc. The loan products were originally Internet loans in cooperation with commercial banks and consumer finance. In 2019, the two launched Vivo Pay or Oppo Pay services in cooperation with UnionPay respectively, which featured full-featured NFC function, that is, you can wake up the Pay function without unlocking it on the phone’s screen state.

Most of Huawei’s financial business is focused on the B end, cooperating with financial institutions in fintech research and development, including participating in the central bank’s digital currency. The expansion of its C-end customers began with the pre-installation of the non-uninstallable “Huawei Wallet” App on mobile phones at the end of 2018. At present, Huawei has cooperated with China CITIC Bank to launch a co-branded credit Card, Huawei has cooperated with Lakala and TonglianPay to launch the “mobile POS” mobile payment collection product.

At present, mobile phone manufacturers, with payment license for Huawei, millet. Xiaomi, which has a fuller financial licence, was spun off from the group in 2018 as Xiaomi went public.

Xiaomi has invested in the establishment of Xinnet Bank in the mainland and initiated the establishment of Tianxing Bank in Hong Kong. In addition, it also includes Xiaomi Insurance Broker, Xiaomi Consumer Finance, Xiaomi Small Loan, and Xiaomi Commercial Factoring. In December 2020, Xiaomi, together with Beijing Financial Holding, JD Digital Science and Megvii Technology, set up Park dao credit investigation agency, the second personal credit investigation agency in China. In 2020, Xiaomi Finance will be reorganized into Tianxing Digital Division, which mainly focuses on three aspects: industrial financial services, personal financial services and financial technology services.

“[Phone makers] still need a payment license to expand the mobile ecosystem.” Payment business is a natural source of big data, and the core of fintech businesses such as Ant and Tencent is still payment, said a senior industry insider. The primary reason for getting a payment license is compliance, and the second reason is to serve your own ecosystem.

According to the latest data released by Huawei, AppGallery, an application marketplace under Huawei’s newly developed self-research ecosystem, has acquired 120,000 applications with HMS Core, 2.3 million registered developers worldwide, and the number of monthly active users (MAU) has exceeded 530 million.

Since last year, emerging e-commerce and live broadcasting platforms have set off a new round of upsurge in competing for third-party licenses. In November 2020, Kuaishou acquired Elian Pay. In January 2020, Pinduoduo acquired Feitong.

However, some agencies pointed out that the current Internet giants with third-party payment licenses include Alibaba, Tencent, Suning, Jingdong, Baidu, Sina, Meituan, Vipshop, Pinduoduo and so on. Although a number of Internet giants have obtained the Internet payment license and the online payment business is booming, it cannot be promoted on a large scale due to the limited number of users and usage scenarios.

Mobile payments are still growing rapidly. Data from the People’s Bank of China shows that in 2020, banks handled 123.22 billion mobile payment transactions, totaling 432.16 trillion yuan, up 21.48% and 24.50% year on year, respectively. Non-bank payment institutions handled 827.297 billion online payment transactions, totaling 294.56 trillion yuan, up 14.90 percent and 17.88 percent year on year, respectively.

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