Date
20 August 2017
Tyrone Lynch, vice president of eBusiness at NTT Com Asia, says conventional payment methods used internationally are not prevalent in China. Photo: NTT
Tyrone Lynch, vice president of eBusiness at NTT Com Asia, says conventional payment methods used internationally are not prevalent in China. Photo: NTT

Lack of local knowledge hinders global e-commerce firms in China

Many overseas merchants are upbeat on the prospects of e-commerce in Asia, especially China, although they see several hurdles, including payment methods and regulations, NTT Communications Corp. said.

“Asia holds a lot of potential for global e-commerce merchants and yet their success is being hindered by a lack of local knowledge necessary to overcome operational challenges, such as currency restrictions, tax regulations, licensing requirements and local payment methods,” said Tyrone Lynch, vice president of eBusiness at NTT Com Asia.

“China, in particular, is in a unique situation where conventional and mainstream payment methods used internationally are not prevalent. Understanding the payment landscape in China is critical,” Lynch said.

According to a survey taken in March and April, most merchants from the United States and the United Kingdom have faced challenges in their e-commerce operations in China and other parts of Asia. 

Half of the respondents faced local tax regulation and compliance hurdles while 46 percent have had difficulties in understanding local market needs. Nearly 45 percent faced language barriers and more than 40 percent have had shipping difficulties, including high costs, NTT Com said. 

The survey covered about 200 US and UK merchants with e-commerce operations in China or other parts of Asia. The companies have annual revenue of US$12 million or more from their e-commerce operations.

Local payment methods and cross-border currency settlement are also major concerns of the merchants, according to the survey.

NTT is offering payment solutions to help merchants expand their reach and gain access to global e-commerce markets. The solutions lower entry barriers and allow rapid access to high-growth e-commerce markets such as China, the company said.

“Our payment solutions will provide access to multiple acquirers and payment methods around the world, while overseas merchants can conduct cross-border e-commerce [transactions] in renminbi and take advantage of the market boom,” Lynch told EJ Insight.

Yuan settlement carried out in Hong Kong will also help eliminate foreign exchange exposure. “When we can provide local acquiring, transaction rates of merchants will be lowered,” he said. “Besides e-commerce payment processing, our omni-channel solution can also support merchants’ evolution to new payment models, such as online-to-offline commerce.”

Despite the challenges, over 80 percent of global online merchants plan on expanding their e-commerce businesses in Asia over the next 12 months. Mainland China, Hong Kong and Taiwan are their top three choices.

Two-thirds of the respondents expect their e-commerce transactions in Asia and China to increase by 10 and 50 percent in volume over the next three years, reflecting the promising business potential of the market.

“Asia’s e-commerce market is expected to reach over US$525 billion in 2014, with China a key driver of growth. But implementation and managing an effective payment strategy could be a very complicated process for merchants,” Lynch said.

The company has formed a partnership with China UnionPay, allowing Chinese consumers to use renminbi to pay for items purchased from US and European merchants.

At the end of 2013, China has issued 4.2 billion yuan-denominated bank cards issued, up 19.23 percent from the previous year, according to the People’s Bank of China. Of the total, 3.8 billion were debit cards.

On average, each bank card was used to pay for 7,554 yuan (US$1,212) worth of goods and services, up 28.16 percent from the previous year, the central bank said. Bank cards have penetrated 47.45 percent of the Chinese market, up 3.95 percentage point from 2012, it added.

– Contact the reporter at [email protected]

CG

Ayishah Ma is a financial reporter on Greater China issues.

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