China’s business-to-business (B2B) electronic payments will reach US$47bn in 2013, accounting for 5.1% of B2B electronic commerce (e-commerce) transactions, according to Celent.
The research and advisory firm, part of the Oliver Wyman Group, estimates in its report entitled ‘B2B payments in China: the sky’s the limit’ that the total transaction volumes of e-commerce, B2B e-commerce, and B2B electronic payments will amount to US$1.8 trillion, US$1.4 trillion, and US$140bn respectively in 2015.
The market size of e-commerce and business-to-business (B2B) e-commerce transactions in China are expected to reach US$13 trillion and US$922 billion, respectively, in 2013.
Currently, B2B electronic payments account for a relatively low percentage of the total B2B e-commerce turnover in the mainland. The main hindering factors are policy, technology, and business-model issues but there is ample room for future growth, the report said. The B2B electronic payment market is already starting to see changes.
Key highlights of the report include the following:
- B2B payments are mainly carried out by banks. However, this status held by the banks is currently being challenged with third-party payments. Therefore, banks have started to provide enterprise customers with value-added services related to payments, which mainly include financing services and the launch of new business lines such as online malls.
- With billing business being the traditional business focal point of payment enterprises, intense competition will ensue. At the same time, as the entry and operations threshold of the electronic payment business of payment gateways is not particularly high, product commoditisation will become rampant. To this end, major B2B payment vendors have started moving forward in the direction of developing higher added value services.
- The B2B payment market is relatively competitive, and various providers have developed their own strategies:
1) Alipay has launched a logistics point-of-sale (POS) strategy, intending to seize 70% of the offline payment market share.
2) 99Bill Corporation has positioned itself as an “electronic financial service provider” and plans to provide fund management solutions for more traditional industries.
3) The international payment giant PayPal, a subsidiary of eBay, has expressed its intention of becoming the first foreign enterprise to obtain China’s electronic payment license.
4) Gopay is a third party payment platform for secure transactions that has been developed and operated by the China International Electronic Commerce Centre (CIECC) of the department of commerce for the promotion of China’s B2B e-commerce development. It is China’s only state-owned payment platform for ministries and their subordinate institutions, and is able to provide adequate security for the trading of funds by customers.
5) Toocle is doing its best in pushing for the launch of B2B services for the online transactions of its subsidiaries, such as China Chemical Network, China Textile Network, Pharmacy Network, and even the websites of other industries nationwide.
6) China UnionPay has launched a B2B online payment service for the public sector via its public payment platform. B2B e-commerce services were launched by the Bank of China (BOC) in 2010.
7) BOC’s online banking covers business-to-government (B2G), consumer-to-consumer (C2C), business-to-consumer (B2C), and B2B e-commerce financial services systems.
8) Minsheng Bank’s B2B payment services include electronic payment authorizations, credit financing for electronic payment products, provision of customer relationship management services for B2B customers, and provision of direct online shopping services to banks and enterprises.
According to the report, in the future, these B2B payment vendors will continue to strengthen the areas of cross-border payments; foreign exchange (FX) settlement; FX risk management and collaboration with more foreign partners.
Also, internet B2B exchanges will transform into B2B e-commerce vendors by adding online transaction capabilities to their existing information-exchange models. In order to avoid price wars, the various major B2B payment providers have accelerated their innovation and begun differentiating themselves from the competition, the report noted.
The penetration rates of B2B electronic payments in various traditional industries are very low; in fact, the rates are below 5% for most industries. But in the future, all the major B2B vendors plan to develop more customers across the industries as well as deepen their services to market segments with specific characteristics.
However, a London summit on the industry’s introduction of the technology cautions that testing and acceptance are still at an early stage and firms should proceed with caution.
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