E-commerce is booming in China as consumers and vendors look to the Internet to save money in tough economic times, but the main beneficiary of their migration may be online payment providers.
Chinese payment providers like 99Bill Corp. have soared on the growth of Internet shopping, changing user attitudes and their own success at offering new payment options in a country where credit cards remain rare.
"I think a lot of companies are discovering e-commerce for the first time," said Boaz Rottenberg, an analyst at Maverick China Research in Beijing. "A few years ago it was very difficult to do, just because because of lack of user trust... and lack of credit cards."
99Bill is one payment provider riding the e-commerce wave in China. With 33 million registered users, the firm has become one of China's largest since its commercial launch in 2005.
Economic gloom may actually have boosted 99Bill's merchant base as business owners pressed for cash have sought ways to receive faster and more reliable payments, Oliver Kwan, CEO of 99Bill, said in an interview.
99Bill booked a tenfold increase in its transaction volume last year. Total online payments in China grew by 180 percent to 274 billion yuan (US$40 billion) in the same period, according to iResearch, an Internet consultancy.
99Bill is among the largest online payment providers not tied to a sister auction site. Alipay, by far the dominant provider, owes some of its success to auction site Taobao, which is owned by its parent company and is known as "China's eBay."
99Bill has not been able to flourish simply by offering a credit card-based model like PayPal's in the U.S. Credit cards are far from the standard payment option they are in some Western countries.
Only about 11 percent of China's 1.3 billion people have credit cards, according to RNCOS, a market research firm. While that ratio is growing, many businesses still lack the systems needed to accept credit cards, and consumers may have trouble getting them in the absence of a national credit rating system.
Only about 15 percent of electronic purchases in China are made with credit cards, RNCOS says.
Firms like 99Bill have therefore had to unlock the payment market by offering options ranging from credit or debit cards to direct bank transfers or charges to third-party prepaid cards.
"It's very hard in China to have a uniform and dominant format," Kwan said. "For the consumer side, what's predominant is lack of credit."
Prepaid cards have been particularly important for Chinese payment providers. The most popular prepaid method 99Bill has offered is the Easyown, a widely used prepaid cell phone charge card from China Mobile, the world's largest mobile carrier.
Users who do not even have bank accounts can use 99Bill to transfer the value of an Easyown charge card bought with cash directly to another vendor. China Mobile's presence in every corner of China - it reported 470 million subscribers at the end of February - makes paying with its charge cards even more convenient.
The charge card's established reputation may also have drawn customers unfamiliar with or unable to get credit cards. Even as credit cards become widespread, prepaid options like Easyown are likely to remain common in China, said Kwan.
"It was very successful, just because the card is very common and well-distributed," Kwan said.