Payments in China – it’s about dealing with a multitude of options
In today’s world of instant gratification, the experience during the check-out can make or break their business. Besides, there are multiple factors that airlines, hotels, OTAs and other travel e-commerce organizations need to deal with in order to ensure a transaction goes smoothly in the multi-channel, multi-device environment.
ChinaTravelNews, Ritesh Gupta - Be it for various payment channels or optimizing the payment interface, travel brands need to handle payments strategy diligently in China.
How quickly can a mobile transaction be processed today?
In today’s world of instant gratification, a couple of seconds can result in shopping cart abandonment or a disgruntled customer. And for travel e-commerce brands focused on China, a market where top OTAs are today garnering over 70% traffic and transactions from mobile, the experience during the check-out can make or break their business.
Joseph Chan, CEO of AsiaPay
“It (digital processing) could be done in 3-5 seconds,” says Hong Kong-based Joseph Chan, CEO, AsiaPay, who says the payments industry has a come a long way to support transactions involving China. So it could be a Chinese traveller buying a travel product or service in and outside China, or even a non-Chinese traveller shopping for an offering from China, the process continues to show remarkable improvement in the payment convenience and overall user experience, says Chan.
Alternative mode of payments i. e. looking beyond traditional options of completing a transaction is already a big hit in China. Over 45% of online transactions are made using e-wallets, such as options offered by Alipay, TenPay etc. According to iResearch, China 3rd party mobile payment GMV touched 2.42 trillion Yuan in Q3 last year, going up by 5.4% from Q2 and 64.3% from Q3 2014.
The most interesting development of late has been the entry of Apple Pay in China.
There are multiple ways of making a point-of-sale mobile wallet payment: NFC (an NFC-enabled device communicates via an RFID link with a contactless transmitter attached to a POS device), QR codes (QR code-based systems manage payment details in the cloud rather than in the device and can be carried out on any smartphone), Bluetooth technology and apps.
And this, as Chan also asserts, will pave way for better user experience as industry participants would learn from each other.
It is clear that what Apple Pay brings is its in-built user identification (finger print/ biometrically-authenticated) feature and a consumer can complete a transaction by not opening any app like one has to do with Alipay, says Chan. This feature can be a big boost to mobile commerce, especially considering the fact that security concerns tend to be a major reason why mobile users refrain from proximity mobile wallets. Apple Pay can also allow customers to withdraw cash at ATM and more focuses on purchases, whereas Alipay/ WeChat Pay extends to daily life of people whether for bill payments, transfer and else. Also, enables one to check the available balance of the account if no network. Apple Pay lets mobile devices make payments at contactless points of sale and in iOS apps. It digitizes and replaces the credit or debit card chip and PIN or magnetic stripe transaction at point-of-sale terminals. It is similar to contactless payments already used in many countries, with the addition of two-factor authentication.
The service lets Apple devices wirelessly communicate with point of sale systems using a near field communication antenna, a “dedicated chip that stores encrypted payment information” (known as the Secure Element), and Apple’s Touch ID and Wallet, shared Chan. He said the service keeps customer payment information private from the retailer, and creates a "dynamic security code generated for each transaction". Apple added that they would not track usage, which would stay between the customers, the vendors, and the banks. Users can also remotely halt the service on a lost phone via the Find My iPhone service.
To pay at points of sale, users hold their authenticated Apple device to the point of sale system. iPhone users authenticate by holding their fingerprint to the phone’s Touch ID sensor, whereas Apple Watch users authenticate by double clicking a button on the device. To pay in supported iOS apps, users choose Apple Pay as their payment method and authenticate with Touch ID. Users can add payment cards to the service in any of three ways: through their iTunes accounts, by taking a photo of the card, or by entering the card information manually.
But then Apple Pay has its own challenges, too, as it is relatively new, and needs to identify its area of “sweet spot” to gain traction in China. Alipay’s share stood at 69.9% while Tenpay garnered 19.2% of total China 3rd party mobile payment market in Q3 2015. So Apple Pay needs to combat the strong presence of local players.
It’s still a challenging ride for Apple Pay after partnering with UnionPay, since Chinese consumers are already used to online payments on their phones through WeChat Pay and Alipay also for many other daily life services such as utility payments, investments, gifting. etc. While ApplePay’s NFC relies on the terminal acceptance coverage, WeChatPay and AliPay do not.
What would it take for Apple Pay or Android Pay to gain acceptance in China?
1. Popularity and trend of the smartphone brands in coming future;
2. Growth rate of merchant adoption, ease of acceptance and costs to merchant/providers (if any)
3. Variety of merchant acceptance
4. Consumer acceptance/behaviour
Removing payment friction
Processing a payment during the check-out process is just one aspect that needs to make a digital transaction a positive experience. Chan underlines that there are multiple factors that airlines, hotels, OTAs and other travel e-commerce organizations need to deal with in order to ensure a transaction goes smoothly in the multi-channel, multi-device environment.
“Payment interface is of paramount importance as this enables a consumer to take a decision. Merchants need to plan diligently as move on from online to mobile or extend options on both. (They need to) Offer choice in terms of payment options. Also, learn how to deal with fraud, especially attaining a balance between adding a layer like 3D Secure that can control fraud but also lower the conversion rate, and customer service say for an event like re-fund via mobile app,” says Chan.
Overall, speed and convenience of making a payment are two key deciding factors in m-commerce.
With the increase of mobile payment for travel products in China, there is an increase on fraud risks in mobile payment, e.g. fraudulent card payments, fishing, false mobile app, faked sales promotion QR code and even stealing customers’ private banking information for payment.
Increased public education in security awareness and trusted payment processing platforms are keys to minimizing the coming fraud risks.
Accepting payments in China
As for accepting payments as a non-Chinese brand, it is vital to understand the regulatory environment and also the consumer behavior when it comes to making payments.
“Travel entities can consider a single point “integrated” e-payment platform that can allow its customers to readily use any of these payment options in China to pay,” says Chan.
For its part, a specialist like AsiaPay can provide advice and support and on how to apply these payment options effectively across various payment channels. Travel companies can opt to use a payment gateway to centrally manage all the payment processing, related settlement and fraud risks, while operating direct merchant account of each of these options. For this model, an organisation may be required to use its China local entity to apply such direct merchant account. Or one can consider to work with a payment gateway partner which in some special cases local entity requirements may not be a mandate.
Also, in order to deal with the relatively new form of payment methods, a travel company needs to handle system integration. Also, various non-credit card payment options have different interface standards and rule sets, e.g. maximum payment limit cap; mostly does not support pre-authorisation, void, partial capture and reversal; refund could be offered online but only possible offline in some payment options; and settlement cut-off.
Overall, the key to accepting new form of payments lies in -
1. Working out an integrated payment flow across payment options across channels and languages;
2. Plan for integrated payment transaction and settlement reportings;
3. Dealing with multi-currency processing and conversion;
4. Implement necessary payment controls according to the difference of processing by payment types (e.g. refund, void, capture);
5. Implement fraud monitoring and prevention across payment options;
6. On-going support and maintenance of these payment interfaces of each form of payments according to upgrades over time
For any travel brand opting to foray into China, it is mandatory to optimize IT and project manpower resources, and assess lead time to study, design and implement as well as on-going maintenance of an alternate payment solution, and avoid unnecessary implementation, security and technological risks.