Beware of the "zero-cost" trap! Zhou Xiaochuan: Payment systems should not rely on subsidies to distort competition

Topic: Boao Forum for Asia 2026 Annual Conference

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On March 26, the Boao Forum for Asia 2026 Annual Conference was held in Boao, Hainan, from March 24 to 27. At the “Building a Diversified Cross-Border Payments System” forum, People’s Bank of China Governor Zhou Xiaochuan said that a good payment system is a diversified system, and its evaluation indicators should also be diversified. The key lies in the fit and appropriateness of each indicator, rather than chasing leadership in a single area. In this process, achieving interoperability among different technologies is crucial; otherwise, it will bring extreme inconvenience to users.

He said, “Overall, the situation in Asia is looking positive, and all parties are placing importance on retail and other small-amount, high-frequency applications. Technology roadmaps are diverse but there is quite a lot of consensus. The key is to clarify the core KPIs. Interoperability is a focus. It involves terminal standards such as cards, QR codes, and NFC. Standards vary across countries (such as India’s UPI). You can’t make one party yield to another, so coming up with technical approaches that are compatible with each other can actually make a big difference. Although it’s not as good as 100% unified standards, it can still make a big difference. I’ve given examples to others multiple times: in the 1970s, China developed color TV. When you look at it, there are three major standards worldwide. Later, because integrated circuits developed quickly, they came up with a scheme that solved it. So now interoperability can also have similar approaches. Whether through conversions between QR codes, or through gateways for conversion, or some other methods—anyway, there are several ways to basically achieve interoperability.”

The second issue is payment speed. He noted, “On the speed issue, it’s best to place even more emphasis on adaptability. You need to strike a balance between convenience and compliance, and it’s not the case that the faster the better. Requirements from the regulatory side—anti–money laundering, anti-fraud, countering the financing of terrorism, and so on—are unavoidable. These compliance checks are usually carried out in three stages: before, during, and after the transaction. Everyone knows that for cross-border gambling and online fraud, the money is split into hundreds or thousands of accounts as soon as it hits the account, bypassing your compliance checks. If you want to fix it, it becomes much harder afterward. Some things can be done during the transaction, but there are also challenges. Pre-transaction checks are definitely something people don’t like either, especially under foreign exchange controls. But you can’t deny that compliance requirements—anti-fraud, countering the financing of terrorism, and anti–money laundering—are requirements you can’t get around. In the design of speed, you need to arrange steps to handle them.”

The third indicator that needs to be adapted is the user interface. Zhou Xiaochuan said, “It should be convenient, friendly, and come with a comprehensive error-correction mechanism. What is adaptability of the user interface? It’s what the user wants, without needing to know the behind-the-scenes details. Just like using a phone—you don’t know what technical support the App has behind it.”

The fourth is cost—of course, the lower the better. He believes, “Ideally, costs should be truly accounted for. The problem is that since every system wants to claim that it is the best, it wants to drive everyone else away and take this territory, so its cost looks very good. But when saying that, it often involves subsidies. Often because it has strong financial resources or financing channels in the capital markets, it uses that money to subsidize, and in the end it says its cost is zero, and it’s fine not to charge, or to say it’s very low.”

Zhou Xiaochuan believes that behind this, many problems are often hidden. “One problem is thinking that payments are an important traffic entry point. Once you get it, you also get user data. This data can be used for many other purposes to make big money, or the data itself can be sold. Use the money from selling it to subsidize—this can easily lead to unfair competition, and customers become confused. So it’s not that zero cost is the best, or that no fees are the best. The best is to have costs appropriately matched, and competition should be fair. At the same time, the payment system itself should not be operating at a loss; otherwise, it would also distort things.”

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Responsible editor: Song Yafang