Online Payment in China: Transitioning from Cash to E-Commerce Solutions

SUMMARY

Report Introduction

Over twenty years after the first credit card was launched in China, and six years since the Chinese banks were unified in under a nationwide network, online payments are finally starting to catch on in China. Home to what is already one of the largest online populations in the world, at over 220 million users, China is a market ripe with potential for online payment services, but for those interested in entering the market, a number of unique challenges remain.

In this report, we highlight the potential for online payment in China as well as the potential pitfalls and challenges that you will encounter. We also examine the brief history of, the current state of, and the future development of online payments in China. Lastly, we have also identified and profiled the key Chinese companies to look out for in the market today.

Key Questions Answered

Below are some of the key questions that will be answered in this report:

• How important is the role of cash and prepaid payments in China today?
• What is the role of credit cards for online payment development in China?
• Which online payment models will become widely accepted in China?
• What is the regulatory environment for online payment in China?
• Which companies are leading the way in China's online payment sector?
• What are the strengths and weaknesses of the major online payment companies in China?
• Are online payment companies in China making money?
• What are the challenges and risks for online payment companies in China?
• What opportunities are available for market entry and growth?
• Is there a potential “China Paypal” in the market today?

TABLE OF CONTENTS

1. Introduction to Online Payment in China .

• 1.1 China's 50-year late start
• 1.2 Market Potential by Large Numbers
• 1.3 Nuances and Challenges of Online Payment in China
  • 1.3.1 Consumers' Continued Preference for Cash Payments
  • 1.3.2 Credit Card Use Remains Low, POS Terminals Limited
  • 1.3.3 Online Payment Restrictions for Debit Card Users
  • 1.3.4 Grey Skies for Government Regulations

2. The China Online Payment Market Today .

• 2.1 How to Build a Payments Network from Scratch?
  • 2.1.1 Leveraging Cash-based Systems for Online Payments
• 2.2 Top Online Payment Companies to Look Out For
  • 2.2.1 Alipay
  • 2.2.2 Tenpay
  • 2.2.3 99Bill
  • 2.2.4 IPS
  • 2.2.5 YeePay
• 2.3 China Online Payment Users: by the numbers
• 2.4 China Online Payment Merchants: by the numbers

3. Opportunities and Challenges for Online Payments in China .

• 3.1 Alipay and Tenpay: They Might be Giants
• 3.2 How to Compete with Zero Fees?
• 3.3 Market Consolidation and Payment Licenses
• 3.4 New Channels for Online Payment: Mobile Phones

4. Appendices

• 4.1 China Bank Cards Explained
• 4.2 China Online Payment Company Headquarters
• 4.3 China Online Payment Provider Bank Partners
• 4.4 China Online Payment Foreign Credit Card Partners
• 4.5 Multiple Payment Channels for China Payment Companies

List of Figures

• Figure 1: China's Late Start: Banking and e-Commerce Milestones 1950-2008
• Figure 2: Internet Users in China, 2001-2007 (M)
• Figure 3: Bank Cards in Circulation in China, 2002-2007 (M)
• Figure 4: Credit Cards Circulating in China and in the US, 2007 (M)
• Figure 5: ATMs in China and US, 2005-2007 (per 1 Million People)
• Figure 6: ICBC Online Payment Password Card
• Figure 7: China Government Groups Involved in Third-party Payment Regulation
• Figure 8: Alipay and China Post Cash Remittance Form
• Figure 9: China Mobile Prepaid Card
• Figure 10: Alipay Transaction Volume Breakdown (%)
• Figure 11: Tenpay Transaction Volume Breakdown (%)
• Figure 12: China Online User Income Distribution, 2007 (RMB per Month)
• Figure 13: China's Online Payment Registered Users, 2003-2007 (M)
• Figure 14: Third-party Payment Provider Registered User Breakdown, 2007 (M)
• Figure 15: Overall Merchant Partners, 2007 by Tier (%)
• Figure 16: Different types of Bankcards in China
• Figure 17: Shenzhen Development Bank Credit Cards
• Figure 18: Co-branded Debit Cards: Alipay Dragon Card and Taobao Green Card
• Figure 19: China Online Payment Company Headquarters
• Figure 20: China Online Payment Provider Bank Partners
• Figure 21: China Online Payment Provider Foreign Credit Card Partners
• Figure 22: China Online Payment Provider Key Domestic Credit Card Partners
• Figure 23: Multiple Payment Channels for China Payment Companies