Deepak Shahani
New online-payment systems are drawing wary consumers into the world of Web commerce.
BusinessWeek, p.44, Nov. 19, 2007.
In this article, it discusses the increased use of online payment systems in emerging economies such as China. In China, people are more willing to use online payment methods similar to PayPal, rather than using credit cards. Credit card penetration in China is low, as compared to other countries such as India, where their financial systems is more deregulated and more developed, aided by the infiltration of foreign banks.
In China there is an interesting phenomenon, where the citizens are more comfortable with paying for everything by cash. It is difficult to change consumer habits, but this is changing slowly. The article mentions that the skepticism about the use of credit cards is because they are: “afraid of online fraud, so they don’t use them.”
As a result, online commerce or e-retailing has been facing many challenges in China. Nevertheless with the growth in online payment companies, they are seeing increasing growth in the industry: “Consumer e-commerce in the country will top $1 bn in 2007.” It is also expected that the industry will grow at an average of 34% in the next three years.
Online payment methods has greatly affected e-commerce in China, and has provided a solution to the security issue faced in the minds of the Chinese people. Many businesses are experiencing increasing sales from their online sections of their business such as Joyo Amazon and Taobao company which uses AliPay. AliPay is the number 1 online payment service in China with a market share of 50% of the market. AliPay has greatly increased the confidence of online shoppers. A method to increase security, enforce contractual obligations, and reduce the problem of trust, is where online payment to a seller is only made when a buyer has received the merchandise.
Lower-tech methods of payments still need to be provided as not all citizens are comfortable with online payments. Therefore businesses need to train staff in recognizing counterfeit bills at cashiers and face the risk of its delivery people to carry large amounts of cash. Chinese businesses prefer customers to pay through more secure methods such as by credit card or online payments because it is more efficient and less risky. Yet as the saying goes, old habits die hard, and the Chinese have a habit for paying for most things with cash.
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5 comments:
This was an interesting article. It made me wonder why there is more trust in online paymet systems, like what you discussed, over credit cards. It was a little different for me because personally, I would rather pay for purchases using my credit card online versus a system like Pay Pal.
Interesting article! -- Jessica D.
We need to take a different view of payments in developing nations. Until more recently, credit cards were not really an option for most Chinese. The fact that a Chinese firm is getting the lion's share of the volume is to be expected.
The article highlighted 2 very important issues in my opinion. One of Online Security and the other of Chinese Online growth. When it comes to Online Security, American consumers are a little bit reluctant in pursuing the same becuase of the belief in the social safety net. The presence of Social Security as well as advanced tracking systems of where and how the fraud happened. Americans have an advantage of relying on the safety net. Whereas on the other hand it is quite startling to see that a growing economy like Chinese is looking into online security at an early age of adapting to computers. Falshback 10 years from today, people who had internet access in America were not even aware of the online frauds that happen. In a lot of ways, article also highlights the cultural differences between the 2 great nations.
-Varun
Interesting article Deepak. I actually prefer to pay with credit card than online systems like Pay Pal. I am more concerned with people hacking into Pay Pal's systems and stealing my information compared to credit card theft.
It's funny but a lot people scrutinize information being compromised over the Internet but hand their credit card to anyone in a store or a restaurant. Stores are required to keep customer data on hand for a certain amount of time so transactions can be verified by credit card companies and banks. This information can certainly be compromised.
Another technique known as "skimming" allows people to obtain the card numbers by swiping it through another device. This is often done by waiters who have access to a customer's card out of the customer's view.
The point is there are many ways for people to separate you from your money.
Is cash safer?
Usually erroneous charges can be cancelled and banks offer protection, but once cash is gone, it's usually gone forever. Best bet is to be careful no matter how you're paying for things!
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