Time magazine recently listed the 10 Tech Trends for 2010, that is, those issues and ideas that will shape the Web for this year and the immediate future. Amongst the references to cloud computing, the potential domination of the IPad and reliance on platforms rather than just websites, was the idea of ‘frictionless payments’. This is the ability of consumers or other web users to make money transfers immediately and at virtually no cost.
This is part of the latest ‘mantra’ of the ecommerce industry: ‘frictionless ecommerce’ which involves giving convenience, flexibility and options to a consumer.
The idea of moving money from one person to another, both quickly and cheaply is a relatively new concept. For decades, the banks had a stranglehold on the process. Checks took up to a week to clear, and transferring money from one bank account to another took days, and fees were levied at every step. The introduction of credit cards and EFTPOS made it easier and quicker but provided the credit card companies and banks more opportunities to deduct fees.
There’s no doubt that this will be one of the more interesting areas of development in the ecommerce industry in the future. However, I believe that a ‘frictionless ecommerce’ payments system is still a long way off.
In the current international product sourcing business world, the reliance on safe, cost-effective and seamless payment systems is still of prime importance to buyers particularly those who are sourcing goods from China.
As I discussed in my last post, although China is enjoying exponential growth in its ecommerce sector and the credit card industry is on the verge of major expansion over the next few years, the country is still a cash-based society. There is also a lingering distrust of anything that doesn’t involve cash.
This is particularly so in the millions of small to medium size businesses that power the Chinese private sector. Many SME’s do not have the ecommerce platforms or sophisticated banking systems to handle domestic cyber payments. The same is true for international transactions. A US buyer can’t simply send or wire money to a Chinese supplier if the supplier doesn’t have a foreign currency account held at a Chinese bank. Even if it does, the supplier requires approval from the Government to convert that payment into RMB that can be transferred to its local account. In many cases, such complexity and cost is beyond the reach of most Chinese suppliers.
Even in the area of direct sourcing of Chinese products, the available payment options like T/T or Letter of Credit become problematic because they are simply too expensive for smaller companies and purchase orders.
The ability to simplify the payment options and systems between Chinese suppliers and overseas buyers was one of the major driving forces of the establishment of the B2B intermediary websites like the one I established, www.dhgate.com. Rather than have to make a payment directly to a Chinese supplier which may have limited, unsafe and expensive payment options,( if any at all), sites like mine provide a range of payment options which bridge the gap between overseas and Chinese banking systems and make the process seamless, transparent, cost-effective and safe.
For example, www.dhgate.com currently provides the following payment options:
- Pay Pal, the world’s leading and most reliable online payments service. Pay Pal have recently announced a partnership with ChinaUnionPay, China’s biggest inter-bank payment and settlement system which will enable more and more Chinese companies to participate in international ecommerce transactions. This is the most popular and preferred method as you don’t need to use your credit card online, payments are traceable and Pay Pal offers its Buyer Protection service.
- Credits cards like American Express Visa, MasterCard and Discover card.
- Real time bank transfers.
- Offline payments like Western Union and other bank transfers.
The difference between my B2B site and others is that we recommend overseas buyers do not deal directly with a Chinese supplier but pay any amounts via the above options directly to www.dhgate.com. The site also offers overseas buyers an Escrow Service which is a licensed buyer protection service. Under this service, DHgate receives and holds the buyer’s payment until the transaction is successfully completed. Only after the buyer approves the products received will DHgate release the payment to the Chinese supplier.
This highly innovative service has been very successful with overseas buyers with numerous cases of money being returned to overseas buyers who were not completely satisfied with the quality or standard of what they had purchased. In fact, it has been so successful that it has now been copied by other B2B sourcing sites and has become the standard for Chinese product sourcing sites.
