How to Choose a Chinese Online Payment Solution
As of January 2011, there were 160 million online shoppers in China (CNNIC report from Jan 2011). Any e-commerce store owner knows that the choice of online payment systems can have a strong impact on sales and profitability. In China, there are at least 20 different such platforms such as Alipay, TenPay, 99Bill and PayPal. Choosing which one to use can be a bit daunting so we’ve collected some key info about the most popular platforms and created this handy guide for you. After reading this, we hope your decision is a bit easier.
First Question: Do You Have a Company in China?
This is the first question you ask yourself, because if you do have a company in China that you can use to sign up for a payment solution, you may use any of these providers. If you do not, your options are limited to Alipay and PayPal. All the other payment solution providers request an ICP license which means only Chinese business entities can sign up. Even wholly owned foreign enterprises cannot register for the other payment solution providers. If you really want to use a payment solution other than Alipay or PayPal and you don’t have a Chinese company, you can register a personal account with a payment platform and individual Chinese bank account. However, this may result in a whole host of issues with taxation and money transfers.
What Chinese Internet Users Think About Payment Solutions
There are two important things you should know about what your potential Chinese customers think.
Trust in online payment has historically been low in China. Online shoppers in China don’t necessarily trust the payment option used and they trust the merchants even less. This has led payment solutions to provide escrow services, ensuring that the seller is only paid after the product is received by the buyer.
Alipay is the top dog. It is the most well-known and highly used payment solution out there and so is often used as the basis of comparison. Since so many people already have accounts, and Alipay is known for offering a wide selection of payment and withdrawal options, Alipay is usually the first choice for Chinese e-commerce websites, but that’s not to say that is always the best choice. Plus, it’s sometimes smart to provide buyers with more than one payment option.
Alipay has arrangements with over 60 Chinese banks, Visa and Mastercard. See the full list.
Available payment options:
Escrow - Payment is made by buyer before product is shipped and payment is released when product is received. This is the standard form of payment for any physical products.
Immediate payment – This option is normally used to pay for hotel room bookings, flight bookings or other items that do not need to be shipped.
Both escrow and immediate payment – The buyer can be given the choice.
Foreign companies must pay a $1,000 USD setup fee, but there is no setup fee for Chinese companies.
Transaction fees for foreign companies are 2.5 – 3.0% depending on your annual transaction volume. Chinese companies need only pay 0.7-1.2%.
Foreign companies are welcome to use Alipay and Nanjing Marketing Group can communicate with Alipay to help you setup your account.
Step 1) Register an Alipay account online.
Step 2) Send some paperwork, including:
- A colour copy of a business license.
- A colour copy of the business owner’s passport.
- Some information about the company’s bank account such as the bank’s name, the bank address and the account number.
Step 3) If approved, a contract is signed.
Then the signup process is done. Payment can be received via email or website.
A minimum of $5,000 can be withdrawn at a time.
The Alipay interface is only in Chinese.
Withdrawals can be made only to the official bank account registered with the company.
There is no withdrawal fee.
Websites That Use Alipay:
Since entering China in 2005, PayPal has become the top foreign competitor in the online payment platform market. While PayPal may lack overall usage in China, it is still the most common payment solution used by Chinese buyers to purchase goods from other countries.
Available Payment Options:
Immediate payment only. Although PayPal provides buyer protection, it’s not trusted as much as an escrow service. This can be a major drawback.
When receiving payments from China to a non-Chinese PayPal account, PayPal charges 0.30 USD + 2.9 – 3.9% depending on the previous month’s transaction volume.
If you already have a PayPal account, you should be able to use that account to accept payments from China. For non-Chinese companies, PayPal is the easiest choice by far.
The downside is that not many Chinese people a PayPal account or use PayPal often. They will need to learn how to use it, register an account, trust PayPal and trust you.
Withdrawing money from PayPal is much simpler than for Alipay. Withdrawal charges vary widely by country. Withdrawal to a US bank account is free, while withdrawal to a Chinese bank account costs $35 per withdrawal. In other countries, withdrawals are free only over a certain limit.
99Bill is another leading online payment service provider in China, offering a comprehensive suit of secure, safe and convenient electronic payment solutions to all kinds of enterprises and individuals. As of February 2011, 99Bill had 84 million registered users and about 830,000 merchant partners. 99Bill’s fees are quite competitive, but only for Chinese companies.
Some websites will install both Alipay and 99Bill because this allows them to make payment more convenient for customers that only use one of these platforms.
99Bill can accept payments from over 30 Chinese banks, Visa and Mastercard. See the full list.
Available payment options:
Immediate payment only.
Setup: 500 RMB (About 75 USD)
Withdrawal: 0.1% (With a minimum fee of 5 RMB and a maximum fee of 50 RMB).
Only Chinese companies can sign up for 99Bill. They must have a website with an ICP license number.
Websites That Use 99Bill:
TenPay is an online payment system developed by Tencent which the most successful instant messaging service in China. With Tencent’s "600 million" plus users, TenPay gained an instant foothold in the market. Besides the same basic payment functions the other payment solutions have, TenPay also allows users to use their QQ points or QQ credits. This makes TenPay a great solution for any businesses realted to QQ games, QQ numbers and other QQ services.
Available payment options:
Escrow: 100% free. Free setup, no transaction fees, no withdrawal fees.
Instant payment: Free setup, 1% transaction fee. Every 7 days, as long as your account balance is 500 RMB or higher, TenPay will automatically transfer revenue to your bank account.
Website needs to have ICP number, all the content has to be under Chinese law.
Websites That Use TenPay:
Other Online Payment Systems in China
Some other Chinese payment platforms have advantages in certain situations. For example, ChinaPnR is specialized in phone call and prepaid payments, while CnCard is specialized in online game payments, and online lottery payments. If you’d like more details, please leave a comment.
This post was written by Samantha Wang, manager of Nanjing Marketing Group. If you’re looking to setup a Chinese payment solution, or sell product in China, check out Nanjing Marketing Group.