1 Introduction to Online Payment in
China
Over twenty years after the first credit card was launched in China, and six years since the Chinese
banks were unified under a nationwide network, online payments are finally starting to catch on in
China. Home to what is already one of the largest online populations in the world at over 210
million users, China is a market ripe with potential for online payment services, but for those
interested in entering the market, a number of unique challenges remain.
In this report, we will highlight the potential for online payment in China as well as the potential
pitfalls and challenges that you will encounter. We also examine the brief history of, the current
state of, and the future development of online payments in China. Lastly, we have also identified
and profiled the key Chinese companies to look out for in the market today.
1.1 China’s 50-year late start
To understand the potential for online payments in China, it is important to realize that due to the
late development of the domestic credit card market, China’s e-payment market is essentially
developing 50 years late from the US market.
The Diner’s Club card is widely recognized as the ever first credit card issued, which took place in
the U.S. in 1950. The first Chinese credit card was not issued until 1986, by Bank of China, and it
was not until 2002 when China UnionPay was founded, that bank cards in China, finally unified
under a nationwide network, started being used by the masses.

Table of Contents
1 Introduction to Online Payment in China ..................................................................1
1.1 China’s 50-year late start.............................................................................................. 1
1.2 Market Potential by Large Numbers............................................................................... 2
1.3 Nuances and Challenges of Online Payment in China...................................................... 4
1.3.1 Consumers' Continued Preference for Cash Payments............................................... 4
1.3.2 Credit Card Use Remains Low, POS Terminals Limited .............................................. 5
1.3.3 Online Payment Restrictions for Debit Card Users..................................................... 6
1.3.4 Grey Skies for Government Regulations................................................................... 7
2 The China Online Payment Market Today..................................................................9
2.1 How to Build a Payments Network from Scratch? ........................................................... 9
2.1.1 Leveraging Cash-based Systems for Online Payments............................................... 9
2.2 Top Online Payment Companies to Look Out For .......................................................... 11
2.2.1 Alipay ................................................................................................................. 13
2.2.2 Tenpay ............................................................................................................... 16
2.2.3 99Bill .................................................................................................................. 20
2.2.4 IPS..................................................................................................................... 23
2.2.5 YeePay................................................................................................................ 26
2.3 China Online Payment Users: by the numbers.............................................................. 29
2.4 China Online Payment Merchants: by the numbers....................................................... 31
3 Opportunities and Challenges for Online Payments in China ..................................32
3.1 Alipay and Tenpay: They Might be Giants….................................................................. 32
3.2 How to Compete with Zero Fees?................................................................................ 32
3.3 Market Consolidation and Payment Licenses ................................................................ 32
3.4 New Channels for Online Payment: Mobile Phones ....................................................... 33
4 Appendices ..............................................................................................................34
4.1 China Bank Cards Explained ....................................................................................... 34
4.2 China Online Payment Company Headquarters............................................................. 37
4.3 China Online Payment Provider Bank Partners.............................................................. 38
4.4 China Online Payment Foreign Credit Card Partners...................................................... 38
4.5 Multiple Payment Channels for China Payment Companies ............................................ 39

List of Figures
Figure 1: China's Late Start: Banking and e-Commerce Milestones, 1950-2008.......................... 2
Figure 2: Internet Users in China, 2001-2007 (M) ................................................................... 3
Figure 3: Bank Cards in Circulation in China, 2002-2007 (M).................................................... 4
Figure 4: Credit Cards Circulating in China and in the US, 2007 (M).......................................... 5
Figure 5: ATMs in China and US, 2005-2007 (per 1 Million People) ........................................... 6
Figure 6: ICBC Online Payment Password Card ....................................................................... 6
Figure 7: China Government Groups Involved in Third-party Payment Regulation ...................... 7
Figure 8: Alipay and China Post Cash Remittance Form.......................................................... 10
Figure 9: China Mobile Prepaid Card..................................................................................... 11
Figure 10: Alipay Transaction Volume Breakdown (%) ........................................................... 14
Figure 11: Tenpay Transaction Volume Breakdown (%) ......................................................... 17
Figure 12: China Online User Income Distribution, 2007 (RMB per Month) .............................. 29
Figure 13: China's Online Payment Registered Users, 2003-2007 (M)...................................... 30
Figure 14: Third-party Payment Provider Registered User Breakdown, 2007 (M)...................... 30
Figure 15: Overall Merchant Partners, 2007 by Tier (%) ........................................................ 31
Figure 16: Different types of Bankcards in China ................................................................... 34
Figure 17: Shenzhen Development Bank Credit Cards............................................................ 35
Figure 18: Co-branded Debit Cards: Alipay Dragon Card and Taobao Green Card..................... 36
Figure 19: China Online Payment Company Headquarters...................................................... 37
Figure 20: China Online Payment Provider Bank Partners....................................................... 38
Figure 21: China Online Payment Provider Foreign Credit Card Partners.................................. 38
Figure 22: China Online Payment Provider Key Domestic Credit Card Partners ......................... 38
Figure 23: Multiple Payment Channels for China Payment Companies ..................................... 39