The retail value of financial cards in China grew by 22.1
percent in 2006 to a total value of around 1.51 trillion yuan, with
online payments and M-payments (mobile payments) taking wider
spaces in the market.
Internet payments
In 2005, PayPal, the e-payment system of eBay, entered the
Chinese market. In August 2006, Alibaba, a relative newcomer to
China's Internet payment market, sold 40 percent of its shares to
Yahoo Inc.
The country had about 40 Internet payment portals by the end of
last year, according to a report by the market research firm
Euromonitor.
With more companies entering the online payment market,
transaction value reached 34.7 billion yuan in 2005. Online
activity by consumers is projected to grow by 43 percent on average
in the three years following 2006.
Some 35 million consumers are forecast to make purchases online
this year, raising the transaction value from 64.9 billion yuan
last year to 107.2 billion yuan in 2007.
Mostly used by young consumers, credit cards are now the
preferred means of online payment. Pre-paid cards will emerge as
another possible payment tool, but it is expected that demand for
pre-paid cards to be used on the Internet will be limited, at least
in the near term, as secure protocols have not been sufficiently
developed, the report said.
It is generally accepted by banks and card issuers that the
Internet is the most promising new payment channel, the report
said, though its use is still developing in China. Internet
payments accounted for only 4 percent of financial card spending in
2006. It is projected to expand to nearly 8 percent by 2011,
Euromonitor predicted.
With more established operations like PayPal entering the online
payment sector, competition will heat up dramatically, the report
said.
Using the Internet for payments is still at a nascent stage, but
improved, secure and mature electronic banking systems are
projected to boost online payments in China to reach a value of 200
billion yuan by 2011.
With the implementation of an Electronic Signature Law, Internet
payments will grow along with e-commerce, the report said.
Consumers in China are expanding their use of the Internet,
shifting from simply checking their account information to online
payments using financial cards.
M-payment
The number of mobile phone subscribers has now risen to more
than 500 million, with M-payment use also expanding after a period
of moderate growth from 2002 to 2004.
There were 15.6 million M-payment users in 2005, an increase of
134 percent over 2004, accounting for 4 percent of total cellphone
subscribers and an industry value of 340 million yuan.
Domestic analyst Norson Telecom Consulting, forecasts that the
M-payment user base will grow to 139 million by 2008, or 24 percent
of all cellphone users, with an industry value of 3.28 billion
yuan.
China UnionPay and China Mobile established the Union Mobile Pay
Ltd joint venture in 2003 to operate a mobile phone payment
service. Through the combination of electronic money and telecom
technology, M-payments have the potential for strong penetration,
along with convenience, compatibility and low payment costs, the
consulting firm said.
Yet the usage ratio is still low as it will take time to foster
new consumer behavior, improve M-payment security and strengthen
cooperation along the industry chain.
M-payments can provide a new payment channel, but further
development will require widespread cooperation, including from
telecom operators, merchants and banks, as well as consumers
themselves.
(China Daily July 27, 2007)
