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)