• Cross-Border Payments – China Leading the Way for E-Commerce (Pt 4)  

Cross-Border Payments – China Leading the Way for E-Commerce (Pt 4)

In this series, we are taking a close look at the current state of cross-border payments. In our first installment, we considered how the growth of cross-border commerce and globalization has changed payments forever. We then looked at the great strides happening in the United Kingdom, and in our last post, we addressed some of the biggest challenges that hinder cross-border payments, and how these effect businesses, the global economy, and growth. In this fourth post, we take a look at another powerhouse in E-Commerce innovation, China.

The oft-quoted fact that The Great Wall of China is visible from space is, in fact, an urban legend. But while the debunking of this common misconception means the 5,500 mile long structure must be scored off the list of things one can see from orbit, China could soon have another asset observable from the stars—namely the monumental piles of money the country is poised to net via E-Commerce.

After generating a turnover of $328 billion through B2C and C2C E-Commerce in 2013, China sat only behind long-time leader, America, in the list of most fruitful online economies. Estimates for 2014, however, confidently anticipated that China will have now gone one better and established itself as the highest-grossing E-Commerce country on the planet.

Popular purchases China 2014_cropped
Figure 1: Most Popular Purchases by Category
Source: The Paypers China Cross-Border Ecommerce Report Update 2014

And while the rise of China as an economic superpower in the last 35 years is old news, its leading role in E-Commerce remains a staggering achievement. As a KPMG report of 2014 notes, Chinese internet users totaled just 2.1 million in 2000, with the country yet to develop a single E-Commerce application. Today, over 600 million people in China are online, with B2C buyers expected to splash somewhere in the region of $540 billion in 2015. Interestingly, a large chunk of that money will be spent from mobile devices. In 2013, 55% of internet users in China made a purchase on a mobile, compared to just 19% in the US, and mobile E-Commerce is projected to have a turnover of over $40 billion in China this year.

Mobile infographic  KPMG report
Figure 2: Mobile Payments – China vs. USA
Source: KPMG – Ecommerce in China: Driving a new consumer culture

No summary of E-Commerce in China can possibly be complete without a closer look at Alibaba; the country’s most dominant E-Commerce operator by far. With an 80% share of the domestic E-Commerce market, the company generates more revenue than Amazon and eBay combined according to the Financial Times, and broke the world record for an Initial Public Offering by raising $25 billion on the New York Stock Exchange in late 2014.

Alibaba’s Chairman, Jack Ma, is now China’s richest man—despite being rejected for a job at Kentucky Fried Chicken in a former life. Looking to the future, however, Ma speaks poetically about his desire for E-Commerce to become “like electricity”; an unseen force that is simply a part of everyday life.

Perhaps the most electrifying statistic about Alibaba is their likely slice of the projected $2.1 trillion China will generate through B2B E-Commerce channels by 2020. And, as pointed out by Fortune, the company’s privileged geographical closeness to manufacturers is a key advantage for Alibaba on the global B2B scene too, which is expected to become twice as lucrative as B2C E-Commerce in the same timeframe.

In a 2014 analysis of how business can best be a part of this Chinese-led B2B explosion, Forbes underscored the complexity of B2B transactions in comparison to B2C trading. Variable prices, higher volumes of goods, and taxation are all listed as pressing concerns for B2B merchants and buyers, prompting the author to conclude; “Most B2B models are moving away from legacy systems that involved the use of EDI (electronic data interchange), which were expensive and cumbersome to handle, toward ubiquitous and affordable online platforms where buyers and sellers can meet from anywhere in the world on the Web to transact goods and services, using only standard PCs and Internet.”

The Great Wall took over 2,000 years to build, but Chinese E-Commerce has become a wonder of the world more quickly. And as the country’s economy continues to blossom, the building blocks for future success online just keep falling into place. Undoubtedly, astute businesses everywhere will be quick to integrate the technology that ensures they can echo China’s resounding success. 

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