NEWS

044
China’s e-tail purchases on Taobao, has helped in-
crease the confidence of many online

awakening
shoppers. It has more than 47 million
users, and every day it processes some
780,000 payments worth a total of $20
million. “Only when the buyer gets the
thing can the seller get the money,” says
New online payment systems are drawing mainland Shao Jie, a 25-year-old writer in Beijing
consumers, many of whom lack plastic, into the fray who says she has bought “countless”
items via AliPay, from $4 boxes of in-
stant noodles to a $435 limited-edition
teddy bear.
AliPay faces plenty of challengers.
tic, e-tailers are getting a Joyo, for instance, has its own payment
Soleil’s Feng says
e-commerce just big boost from dozens of system and doesn’t allow customers to
became viable for online-payment systems use other services. Hong Kong-listed
her company offered by banks and outfits Tencent, China’s top instant-messag-
similar to the popular U.S. ing system, has a payment service. And
service PayPal. All told, many banks offer online payments. All
online payments by both told, China has about 50 such services,
companies and consumers says Liu Bin, an analyst with Beijing con-
are expected to triple over sulting firm BDA. One thing yet to take
the next two years, to $24 off, though, is credit cards. Chinese con-
billion, according to market sumers, says Liu, remain “afraid of on-
watcher iResearch. “There line fraud, so they don’t use them.”
has been a lot of progress,” The growth in payment options is
says Hanhua Wang, head spawning new Net businesses. Soleil
of Joyo Amazon, Amazon. China, a Guangzhou-based exporter
com’s operation in China. of pet toys and other accessories such
About 15% of Joyo’s sales as leashes and collars, once shied away
are now paid for online, from e-commerce in its home market
double the level of two because of the difficulty in getting paid.
years ago. But with the new systems, the company
The spectacular ini- is starting an online operation targeting
tial public offering of Chinese consumers. Online payments
Alibaba.com on Nov. 6 are “a very good opportunity for us,” says
—the biggest ever for a Chi- general manager Kate Feng. “Not many
nese Internet player—will people use credit cards because they
By Bruce Einhorn and Chi-Chu Tschang provide a further boost. The Hangzhou don’t think it’s safe.”
Online shopping has long been the lag- company, which nearly tripled in value Still, most e-tailers aren’t about to
gard of the Chinese Web. While ad- on its Hong Kong debut, is an exchange give up on lower-tech payment meth-
driven outfits such as search company where small and midsize businesses trade ods. Joyo, for instance, has expanded its
Baidu.com and portal Sohu have seen everything from semiconductors to shark COD service to 345 cities, up from just 55
sales—and stock prices—soar, China’s fins. Its parent com- two years ago. COD is
e-tailers have had a rougher time. One pany, 39% owned by hardly ideal: Workers
big reason is that it’s tough to sell on- Yahoo!, also runs Chi-
line in a country where few people have na’s top consumer auc-
PREPARE must learn to recog-
nize counterfeit bills,
credit cards. Consumers who do buy tion site, Taobao, and is FOR LIFTOFF for example, and it’s
on the Web typically opt for a solution likely to use some of the BILLIONS OF DOLLARS risky to send delivery
40
that’s both expensive and inconvenient $1.5 billion it raised to TOTAL people into the streets
for merchants: cash on delivery. fund growth there. ONLINE carrying wads of cash.
30 PAYMENTS
But now, business for China’s e- A key part of Tao- IN CHINA Nonetheless, the com-
Paul Hu/Assignment Asia

tailers is picking up. The Internet So- bao’s success has been 20 pany feels it has little
ciety of China predicts that consumer AliPay, the country’s choice. “We want peo-
10
e-commerce in the country will total No. 1 online payment ple to pay online,” says
$1.3 billion in 2008 and grow at an aver- service, with half the 0
CEO Wang, “but the
age of 34% annually over the next three market. The system, '05 '06 '07 '08
EST.
'09 '10
customer has certain
Data: iResearch
years. While few Chinese pay with plas- free when used for habits.” ^

BUSINESSWEEK I NOVEMBER 19, 2007