Last night, it took me only 15 minutes to apply and pay for my tourist visa to Cambodia using their e-Visa online platform. After I finished, I felt a bit bewildered and didn’t know what to do with myself next - there has to be a next step, or at least an error to attend to, right? Perhaps I have been living in China for too long, but the Cambodia e-Visa application process and subsequent payment (using my U.S. MasterCard via PayPal) was so seamless and simple that I was in disbelief. After having been jolted back into the realization that payments outside of China can just be THAT convenient, I felt inclined to emphasize in a blog entry just how far the China payments market has to grow.
My point is not to knock on Chinese third-party payment companies, but is to emphasize the stark difference between the environment for payments in China versus that of most Western countries. While my list is long, I will describe three of the biggest differences below:
1) Credit card use remains low; direct debits used for online payments instead
In most western countries, the operators of online payment platforms are largely based on existing credit card networks that had already been established. To date, over 640 million credit cards are in circulation in the US, alone. In China, however, only about 50 million credit cards are in circulation. Online payments in China are largely conducted via third-party payment companies which provide a link between merchants and the consumer’s bank account and payments are deduced via direct debit.
2) Consumers trust cash
As expected in developing countries, cash is by far the favorite and most widely used form of payment in China. For convenience, for perceived security, for a lack of other payment options (notably in smaller towns and villages), and even for no better reason that it being a lifetime of ingrained habit, cash is king.
Even with the advancements made in payment and money transfer services (such as debit cards and inter-bank fund transfers), it is still very common in China for consumers and merchants to settle large value transactions with large piles of cash.
3) Quasi-online payments an interim solution
Related to my first two points above, many Chinese e-commerce companies have opted for cash-on-delivery services with the website serving primarily as an information directory. NASDAQ-listed online travel agents Ctrip and eLong are among the largest Chinese e-commerce companies that rely on cash-on-delivery services, accepting credit card payments only as a supplementary service.
In a young and developing payments market, smaller upstarts are attempting to make headway into establishing themselves as a “PayPal of China”. At Maverick China, we have profiled ten of the most promising third-party payment companies in China today. See the complete list of companies and their report summaries here.
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