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Understanding Dynamic Chinese Online Payments Market

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Understanding Dynamic Chinese Online Payments Market

  1. 1. Understanding the Dynamic Chinese Market 10 – 12 th March 2009, Las Vegas Christopher J. Uriarte, Head of International Development GuoDong Zhao, CEO ChinaBank Payment
  2. 2. Agenda <ul><li>Introduction to China </li></ul><ul><li>Chinabank Payment – the Company </li></ul><ul><li>Payments in China </li></ul>Understanding the Dynamic Chinese Market
  3. 3. Introducing China *Source: World Census **World Population estimated at 6.7 billion Population Largest City Total Households GDP US$ 2007 GDP Growth 2007 Internet Use Mobile / Cell Users 0.3 billion New York - 8.3million 106 million 13.86 trillion 2.2% 108 million 127.5 million 1.3 billion Chongqing - 32 million 351 million 10.21 trillion 10.0% 298 million 633.8 million USA China
  4. 4. Introducing China – Financial Cards Millions USA China Card Functionality ATM 1,277.5 1,374.1 Debit 365.6 1,316.9 Credit 722.2 59.5 Prepaid 998.7 154.7
  5. 5. Modern China <ul><li>Hosting Olympic Games was an ‘opening’ ceremony to the World </li></ul>Summer Olympic Visitors 1 million World Expo Visitors 70 million World Expo Ticket Sales US$10 billion
  6. 6. About ChinaBank Payment 网银在线 GuoDong Zhao, CEO ChinaBank Payments
  7. 7. Company Overview <ul><li>Chinabank Payment is an electronic payment solution provider. From a pure online payment service provider, CBP has diversified its offerings in 2006 and introduced the successful MotoPay service ( Mobile-Order and Telephone-Order Payment ). </li></ul>Incorporation of CBP Introduction of current controlling shareholder Signed outsourcing contract with China Merchant Bank to distribute POS Became strategic partner with Visa Introduction of MotoPay service Started POS distribution Signed outsourcing contract with Bank of China to distribute POS in Beijing Signed outsourcing contract with Bank of Communications to distribute POS in Beijing Signed contract with Holiland, U-town, Cross Point, and E-mart to provide close-loop prepaid card service May 2005 July 2005 October 2006 Sep 2007 Feb 2008 August 2008 June 2003 July 2007 Jan 2008 Signed contract with Bank of China to provide prepaid card service via BOC’s POS
  8. 8. Booming Payments Market <ul><li>The company has 24,000+ merchants </li></ul>
  9. 9. CNP Payment Gateway Acquiring Banks 作银行和卡组织
  10. 10. Domestic card Domestic card online payment flow chart: 3 Choose the goods Send the pay order Select the bank Send the requirement of deduction Input the card info and password 2 1 8 4 Give the goods 5 6 Result of payment 7 Send the result to merchant Consumer CBP Acquire bank Merchant
  11. 11. International credit card International card online payment flow chart: 3 Choose the service Input password Send the requirement of deduction 2 1 4 offer the service 8 Result of payment 7 Send the result to merchant Input the credit card info 3-D Send the Info 5 6 Give result 9 Send the pay order 10 Consumer CBP Acquire bank Merchant
  12. 12. The Challenges we faced <ul><li>International Fraud increase - averaging 2% </li></ul><ul><li>Fraud increase in airline sector </li></ul><ul><li>Fraud increase in MOTO sector </li></ul><ul><li>Fraud increase in retail sector </li></ul><ul><li>Fraud increase in trade sector </li></ul><ul><li>Fraud increase. </li></ul>7 <ul><li>Solution required for the Summer Olympics </li></ul><ul><li>Implemented ReD Shield in April 2008. </li></ul><ul><li>A cumbersome manual review process existed </li></ul><ul><li>We approached Retail Decisions </li></ul>
  13. 13. ONLINE PAYMENT TRANSACTION IN CHINA <ul><li>Example of a typical domestic </li></ul>
  14. 14. Online Payment – Merchant Website
  15. 15. Online Payment – Details of Item
  16. 16. Online Payments – Process to Check Out
  17. 17. Online Payment – Check Out
  18. 18. Online Payment – Login Joe.blogs ********
  19. 19. Online Payment – Order
  20. 20. Online Payment – Chose Payment Company
  21. 21. Online Payment – Choose Bank on ChinaBank Payment
  22. 22. Online Payment – Go to Website of Bank 1234 1245 1234 ******** 12 2020 12 123456 Transaction finally complete
  23. 23. Online Payment – Processing Order
  24. 24. Online Payment – Payment Gateway Confirmation
  25. 25. Online Payments – Merchant Confirmation
  26. 26. ONLINE PAYMENT TRANSACTION IN CHINA <ul><li>Example of an international </li></ul>
  27. 27. Online Payment – Place an order and check out
  28. 28. Online Payments – Log On Joe.blogs ********
  29. 29. Online Payment – Add in the delivery address ******** **** **** **** **** **** ********** **** ******
  30. 30. Online Payment – Choose online payment and bank/card type
  31. 31. Online Payment – Confirm order
  32. 32. Online Payment – Provide card details, make payment 1234 1245 1234 ******** 11 2011 ********
  33. 33. ONLINE PAYMENT TRANSACTION IN CHINA <ul><li>Second example of an international </li></ul>
  34. 34. Online Payment – Select ‘Online Payment’
  35. 35. Online Payment – Select International Card Type
  36. 36. Online Payment – Complete Payment
  37. 37. Online Payment – Confirmation process 2. The consumer is forced to by-pass the merchant to make direct payment to the Issuer Payment Gateway (B2C) 1. Online consumer purchases good(s) with card. 3b. The Issuer will check with the bank to see if there is sufficient funds. 3. They in turn, communicate to the merchant whether the transaction is valid or declined. 4. The consumer receives the communication from the online merchant. ISSUING BANK ONLINE MERCHANT ONLINE CONSUMER
  38. 38. FRAUDULENT ACTIVITY IN CHINA
  39. 39. Fraudulent activity in China - who is liable? <ul><li>Rules are unclear </li></ul><ul><li>Merchants are liable for international payments </li></ul><ul><li>Cardholders and merchants are concerned about security </li></ul><ul><li>China has seen an increase in law suits ; Cardholder v’s Banks / Merchant </li></ul><ul><li>People’s Bank of China (Governing Body) are now reviewing ePayment Regulations </li></ul><ul><ul><li>China Banks joined WTO </li></ul></ul><ul><ul><li>Adoption to international standards taking place. </li></ul></ul>
  40. 40. Fraudulent activity in China – An example of one recent case Judge’s comments: “ Many credit cards transactions do not require proof of ID , it is similar to cash, losing a card is like losing cash, cardholders should foresee this risk associated with credit cards. Taking this case as an example, the cardholder agreed to be liable for the fraud loss when applying for the card , the best way to avoid risk is to look after the card carefully.” Published on Jin Lin Newspapers Nanjing “ Merchant is not liable for fraudulent credit card transaction, losing credit card is like losing cash ”
  41. 41. Fraudulent activity in China – Another example September 12, 2008 Ms. Li and her husband’s credit cards were stolen , and they reported to banks and police within 1 hour . Fraud had already been committed on all the cards. After report stolen, China Merchants Bank and Guangdong Development Bank wrote the fraud loss off . Ms Li and her husband got all their money back.
  42. 42. Fraudulent activity in China – T&C vary tremendously <ul><li>“ Cardholders ARE liable for any loss caused by a third party. The bank is not responsible for any dispute on transactions between the cardholder and the merchant or financial institutes.” </li></ul>3 、 乙方有义务保管好信用卡,因保管不善被他人使用信用卡,由乙方承担由此造成的一切损失。若乙方故意将信用卡出租、转借或以其他方式交由他人使用的,视为违约,应向甲方支付违约金 1000 元人民币,甲方有权收回信用卡,并由乙方承担由此造成的一切损失。 4 、 乙方应妥善保管查询密码和交易密码,如乙方遗忘密码或需要更换密码,可通过甲方客户服务热线、信用卡网站免费办理重置密码手续 ; 也可申请补制密码,并承担补制密码函手续费每封 15 元人民币。对于乙方及其附属卡持卡人密码保管不善造成的损失,由乙方及其附属卡持卡人自行承担。 5 、 乙方与特约商户或办理预借现金机构发生交易纠纷由双方自行解决,甲方不负任何责任,乙方不得以纠纷为由拒绝偿还因使用信用卡而发生的债务。 6 、 甲方有权随时因其认定的正当理由或卡片的风险控管因素,中止或停止乙方使用信用卡的权利。  
  43. 43. Online Payments Survey 2005 The improvements that consumers want to see on online payment in next year Higher security Better legal protection Reduced transaction fee Easier to use More personal management functions More cross bank transaction functions Real time update of the transaction information Better website and product design More value added financial products Other iResearch’s survey in 2005 based on 3701 samples
  44. 44. Most fraudulent items in China Most Fraudulent Items Shoes Electronics Fake Goods AIDS Testing Kits Hotel No-show Airline Tickets
  45. 45. ReD solution proven in China Chargeback (CB) % before & after using ReD services After using ReD services
  46. 46. Why did ChinaBank Payment choose ReD? <ul><li>Can do attitude </li></ul><ul><li>Implementation in time for the Olympics </li></ul><ul><li>International expertise, local presence </li></ul><ul><li>ReD solutions proven in China </li></ul><ul><li>Global offices and global client base </li></ul><ul><li>ReD informative approach to fraud prevention </li></ul><ul><li>ReD’s customized solution </li></ul><ul><li>ReD’s analysis approach that proved; </li></ul><ul><ul><li>Revenue increases </li></ul></ul><ul><ul><li>Reduction in fraud </li></ul></ul><ul><ul><li>Reduction in operating costs </li></ul></ul>
  47. 47. The Result <ul><ul><li>Within the first 6 months, chargeback rate down to 0.3% from as high as 5% </li></ul></ul>
  48. 48. ReD’s Clients in China ReD PRISM ReD Shield
  49. 49. Thank you

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