Getting a foothold in China’s payments market isn’t easy for foreign companies, but for Hong Kong-based Geoswift Ltd, business is booming.
Geoswift enables payments for Chinese citizens studying abroad in the U.S. and Canada, and its operations have grown to include 24 walk-in centers in eight cities in China. Consumers and business operators can send funds in their own currency to an increasingly diverse range of recipients in other countries, who receive the funds in their home currency.
“Convenient, affordable services for Chinese citizens to send and receive funds to foreign universities and other companies in their own currency is huge, and it’s something that’s still lacking for a lot of corporations that want to avoid expensive, time-consuming business-to-business bank wire transfers,” said Raymond Qu, Geoswift’s founder and CEO.
And China has been cracking down in recent years on black market remittance traffic, which is helping to expand Geoswift’s business, according to Qu. “Many underground operators that were illegally sending a lot of money between the China and the U.S. and the U.K. have been shut down by regulators in the last couple of years, which is a big change in the industry and it’s driving plenty of growth.”
Now the privately held Geoswift is planning to significantly expand its reach in 2016, by extending its cross-border payments capabilities between China and businesses in Europe, the Middle East and Africa, where the company sees big opportunities, Qu said.
Though Chinese banking authorities tightly control direct competition from non-Chinese companies in its financial sector, Geoswift—like PayPal and MoneyGram—conducts its remittance business by establishing carefully curated partnerships with Chinese banks and corporate partners.
“China needs help with cross-border payments because demand is so strong with the size and momentum of the Chinese economy, and China’s banks aren’t equipped for the huge volume and types of payments needed,” Qu explained, adding: “We have one client that sends over 300,000 small transactions a day into China.”
It’s a huge potential market with room for more foreign players. Global cross-border payments by Chinese consumers will reach $1.1 trillion by 2020, according to a report by Amsterdam-based Payvision, an international payments processor.
Capturing even a fraction of any part of China’s vast payments volume is a huge opportunity, experts say.
“China is one of a handful of countries where only a few basis points of market share can translate to enormous top and bottom line growth,” said Jordan McKee, a senior analyst with 451 Research.
But entry into China is no easy task, McKee. “While the payments market in China is opening up, it’s dominated by a small pool of vendors that will not be easy to displace. Partnerships are a requirement for success, at least initially and those vendors that bring a level of differentiation into the market, and are creative and flexible with their partnership approaches, will find traction first,” he said.
Though Geoswift doesn’t release its financial figures, the company—founded in 2010—says it’s the fifth-largest non-bank acquirer of China’s state-run UnionPay International operating in North America.
Geoswift’s foreign study-abroad business is soaring, as more Chinese nationals opt to study in the U.S. and Canada, and now in the U.K., where Geoswift opened an office two years ago, Qu said. “Previously only the wealthiest Chinese sent their kids to school in the U.K., but recently more middle-class Chinese can afford it so we’re seeing very strong growth with our cross-border payments service for the educational market in Britain,” Qu said.
The other big growth area for Geoswift is high-volume, low-value business-to-business transactions between the U.S. and China for companies in the travel, insurance and sales sectors paying commissions and reimbursements, Qu said.
To cope with its growth, Geoswift, which also has offices in Shanghai, San Francisco, Seattle and Vancouver, recently hired Robert Miskin as Geoswift’s first managing director for Europe, the Middle East and Asia.
Miskin was previously head of sales for Europe for Isle of Man-based payments processor Optimal Payments (now Paysafe Group PLC). In September 2015, Geoswift hired Visa Inc. veteran Michael Kireopoulos as global head of compliance.
Geoswift is one of only four non-bank entities approved by China’s State Administration for Foreign Exchange (SAFE) for foreign-exchange conversion within China. “This gives us the ability to collect, settle and clear money flows in and out of China, which is a big advantage,” Qu said.
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Corrected January 4, 2016 at 11:25AM: An earlier version of this story gave an incorrect timeline for Geoswift's history.