Going cash free: How to accept payments from Chinese consumers?

Running an eCommerce store?

Want to get more Chinese customer to buy your product?

When I set out to discover the truth about how the 1.3 billion Chinese Consumers pay for their product and services online. I did not settle for finding the top 5 most popular online payment gateways in China, but I went a step further. I plunged into topics such as understanding Chinese consumer behaviours and purchasing patterns, just so that I can get the bigger picture.

Sure the process was long and time-consuming, but it was all worth it. What treasure have I found… remarkable insights that I’m going to share with you here.

A QR code is displayed in a tea shop in Shanghai.
A QR code is displayed in a tea shop in Shanghai.

The Psychology Behind Daily Payment Transactions in Mainland China

If you want to get pay by Chinese consumers you must first understand their purchasing habits and behaviours. Take North America for example, Credit Cards and Paypal are going to be the predominant online transaction methods, and recently we begin to see Apple Pay as well.

Does this mean that people don’t use other payment methods such as Google Wallets? Of course, they do, but just not that often. China is the same, in fact, because China was late in its development and wasn’t tied down by old financial infrastructures like in the United States. China was able to accelerate and created a more interconnected banking system second only to a country whose name I cannot remember, where they literally do not have brick and mortar banks at all.

In China majority of payments are made using WeChat Pay (TenPay), Alipay, China Union Pay (Credit Card), and I’m going to add Apple Pay in here because it is still being used in China, but not nearly as popular as AliPay and WeChat Pay.

While all 3 payment methods are used in China frequently by Chinese consumers, the situations that each payment methods are used is going to vary.

For Online Purchases:

Alipay definitely has the upper hand in the online shopping domain. This is because Alipay is a subsidiary of Alibaba Group, which is also the biggest eCommerce player in China with Taobao and TMall. And since Alibaba Group is in a turf war with Tencent (parent company of WeChat), you simply cannot use WeChat pay on Taobao or TMall.

Brick & Mortar:

Depending on the size of the retailer, most will accept a mixture of Alipay, WeChat Pay, Union Pay, Apple Pay, and even Visa and Master cards. However, while Apple Pay, Visa, and Master cards may vary, WeChat Pay, Alipay, and China Union Pay are almost always accepted.

Street Vendors:

If you’ve never been to China, or you’re unfamiliar with China. Street Vendors are little shops run by mom and pops (sometimes illegally) that sell cooked foods, snacks, and small tools, toys, and hairdressing products. Traditionally street vendors in China only accept cash because they’re not really a legitimate business, however, in the past 3 to 4 years, more and more street vendors begin to accept WeChat pay and Alipay, with WeChat being more popular here. All the purchaser has to do is scan the vendors QR code to make a payment.

International Purchases:

Many Chinese consumers like to purchase products from international websites, especially from Japan and Korea. However, because many international vendors are unaware of, or unfamiliar with WeChat Pay, Alipay, and even China Union Pay. Chinese consumer who purchases often from international vendors will usually just use Visa, Master and sometimes even Paypal China.

Business to Business:

I just want to method B2B very briefly for those who are looking to do business with other Chinese business. Usually, the payment method between two business are pretty standard internationally, and rare is it going to be done using credit cards due to chargeback and high risk of fraud. Wire transfer, Western Union, Bank Transfer, and traditional Cheques are still going to be the primary payment methods used in B2B transactions.

Now that you understand Chinese consumer behaviours a bit better, it’s time to get down to the nitty-gritty and figure out which payment Gateway you should use to start accepting WeChat Pay, Alipay, or China Union Pay.

Top 5 International Payment Gateways in China

Be warned! If you want to sell your products in China, and you want to use your standalone eCommerce store, it is actually very difficult. There are very few standalone eCommerce stores in China, and even fewer that are successful. This is because of most Chinese consumer shops on the big eCommerce platforms such as Taobao, TMall, JD, etc… For a complete list check out our last post: Chinese e-commerce: Debunk the mystery of Alibaba and more

If you really want to succeed in selling to China, you’ll need either a substantial amount of capital for advertisements, a great marketing strategy, or a lot of luck. Also, keep in mind that if you simply just want to have the ability to be able to sell to a Chinese consumer when one is looking at your eCommerce store, then your standard payment gateways will most likely do fine for you.

Like I said most Chinese consumers that purchase international products will likely be using Visa and Master cards anyway. However, if you really want to open your gate to the 1.3 billion Chinese consumers then here are the top 5 most popular payment gateways you can use…

#1 Alipay

Alipay was created to make transactions easier and better for the users of Taobao in 2004. In reality, I believe Alipay was the solution to deal with returns and a large number of unhappy buyers on Taobao in the early days.

Alibaba Group claims that due to China’s weak consumer protection laws, Alipay will be providing escrow services to ensure buyer satisfaction before the fund is released to the seller.

As of today, Alipay is considered to be the world’s online payment platform with well over 400 million users and processing nearly half of all China’s online transactions as of 2016.

And if you are an eCommerce store looking to sell directly to China then Alipay is a great option. Alipay supports Cross-Border Online Payments aiming to help international merchants to sell directly to Chinese consumer in mainland China.

One worthwhile feature to mention is that Alipay will deduct the payment amount from the account of the buyer in Chinese yuan but send the payment to the merchant in whichever currency that the merchant is using.

For example, a Chinese consumer can visit your eCommerce store and purchase an item worth $50 USD. Alipay will then deduct $50 USD worth of Chinese yuan from the buyer, and transfer $50 USD to the merchant.

Several foreign brick and mortar store has already started to adopt Alipay in stores with a large amount of Chinese consumer traffics. This is highly apparent in cities such as London UK, Toronto Canada, and Vancouver Canada where there is a large number of Chinese populations.

#2 TenPay (WeChat Pay)

TenPay which is commonly referred to as WeChat pay by the majority of the people in Mainland China is an online payment transaction brainchild of Tencent.

WeChat Pay is really Tencent answer to combat Alipay and it worked out wonderfully. Tencent wanted to take a share out of Alibaba’s eCommerce pie by allowing WeChat user to set up shop and sell on WeChat Store directly, but it needs an online payment transaction platform since they couldn’t use Alipay.

Once launched WeChat pay gain traction very fast and has since become the second largest online and mobile payment platform in China. This is largely due to the fact that virtually every Chinese that has a smartphone will have WeChat installed. Just like Alipay many Chinese individuals will use WeChat pay to refill their public transport cards, pay their utility bills, or any other bill you can think of.

On top of all that, you can even charge your WeChat pay account offline. That’s right, you do not even need an internet connection to add funding to your account. Just let Tencent know how much you want to add to your account and they will send an employee to come and collect your money in person.

#3 China Union Pay

China UnionPay was founded on March 26, 2002, with its corporate headquarter based in Shanghai, China. China UnionPay is really the brainchild of the “Golden Card Project” in the early 1990s. The aim of the UnionPay was to unify China’s credit card system and interconnect various of banking networks, hence the name China UnionPay.

Although as of today, UnionPay is the third largest online payment company in China, it is, however, the first and oldest secured online payment transaction service. While UnionPay is not yet popular in North America, it is actually available and used in 141 countries and regions across the world, with the third-largest value of transaction processed in the world only behind that of Visa and MasterCard.

#4 99Bill

While TenPay, Alipay, and UnionPay will be the three biggest online payment platforms in China. There are two more other worth mentioning.

The first one is 99Bill Corporation. Like the big 3, 99Bill is another online payment platform service in China but at a much smaller scale. That said, while smaller it is more than viable for international merchants to start charging Chinese consumers.

Currently, 99Bill has over 80 financial and banking institutions, with over 300 access points, and has more than 1.1 million merchants that span across 20 different industries.

#5 Yeepay

Finally, we have YeePay. The company mainly focus on but not limited to airline, travel, asset management, education, and digital entertainment industries.

Currently, Yeepay has access to more than 100 commercial banks in China and was among the first businesses to obtain a nationwide payment license from the People’s Bank of China.

The Company has over 93,000 active merchant customers and operates in more than 20 provinces.

Obviously, there are probably dozens of more China payment gateways out there that you can use, but we never tested them and heard of them.

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