Online payment systems have long been seen as one of the major roadblocks to e-commerce in China. Low levels of credit card penetration have led the industry to adopt creative ways around the payment problem. But credit card usage, though growing rapidly, isn’t likely to become mainstream for some time. In the meantime, China’s online shoppers will continue to use some of the following options:
Cash-on-delivery (COD): Antiquated, reliable and enabled by a low-cost labor force. Far and away the favored method of online payment in China – tech consultancy iResearch puts the figure at 60-70% of all purchases. The reason: Why not? The service is widely available, so why suffer the risk or hassle of another method?
Banks: Domestic lenders are increasingly allowing users to make payments from their accounts, though it requires some work to get the process going. However, banks lack the IT systems to directly link merchants and banks, thus requiring the services of a third party payment provider, according to Edmund Hung of Beijing-based tech consultancy Maverick China Research.
Credit cards: They exist, but the system is still far from perfect. Often merchants require the customer to fax or scan a photocopy of their credit card along with a signed receipt.
Alipay: Generally regarded as the king of payment systems in China, so much so that it’s used by other internet companies, not just by the Alibaba Group. Alipay is an escrow service that holds a buyer’s money until the consumer approves the purchase after inspection. According to analysts, Alipay was a major factor in Taobao’s ability to beat eBay in China, which was supported by PayPal.
"Ebay was slow in realizing that escrow was a key feature in the China marketplace," said Christina Splinder, head of corporate communications for Alibaba Group.
Top-up Cards/phone bills: Some micropayments for virtual items can be made to websites with mobile phone top-up cards or by putting the charges on your landline phone bill. Social networking site 51.com is just one of a number of companies that use this method.