Notes

Interrupting Cross Border B2B Payments in China

China's mainland is continuing to expand its reach into different industries across the globe. The growth is increasing and there is a growing need to resolve the B2B cross-border payment bottleneck which is crippling the country's current system of payments. The cross border B2B payment issue is a significant issue for smaller and medium-sized companies that have difficulty accessing the banking system of the country due to regulations in China. The B2B payment bottleneck also has an impact on companies that deal with SMEs in China as well as abroad.



Monopoly in Chinese Bank B2B Payment Monopoly


There are three ways of making B2B payments to China. The most well-known method is the transfer to a bank. Also known as telegraphic transfer it's also known as a banking transfer. Telegraphic transfers are the preferred method to make cross-border transactions, even to Chinese companies located within mainland China. This method can be difficult to obtain for SMEs because they might not have the capital or documentation needed to allow bank transfers in China as well as to transfer money into China. It is also very time-consuming to prepare for any telegraphic transaction.



Transfers to banks could take up to five business days after the transaction was made. Furthermore, after the money arrives in China the company that received it could be required to provide documentation and personnel to the bank receiving the funds in order to have the electronically wired funds deposited into their corporate accounts.



While SMEs and even new companies may be able to fulfill all requirements to send and receiving funds using transfer via telegraphic means, it's still a challenge that Chinese banks are severely restricting access to bank transfers by small financial institutions as well as non-banking enterprises. In the present, there are four hundred banks in China that are authorized to accept and send transfer money to banks.



Although this is an impressive number, it is not sufficient to meet the requirements of the market. The current system is not able to meet the demands of China's expanding market. This is due to the many transactions that cross over the border between China and mainland China.



Electronic Payments


The Chinese consumers have been increasingly adopting electronic payments. In 2018, 92 percent and 47% rural consumers in mainland China utilized smartphones to pay for their purchases on a regular basis. WeChat Pay is the main service provider. Alipay is also a well-known option. The transactions are very simple. Just scan the QR code displayed on the seller's site and pay the buyer's mobile phone.



Merchants who are not from China can use these applications to sell goods to Chinese tourists. Actually, the access to electronic payments increases the likelihood that Chinese tourists are likely to purchase something, and that their purchases could be 25% of the sales of brands, in millions of dollars at any time. Merchants have to sign up for the Chinese payment system in order to see their sales processed through it. This could be a challenge for small companies that have little or no contacts with China and/or are not involved in any commercial activities.



Cash on Delivery (COD).


The most widely used payment method used by Chinese customers is cash on delivery. The method is more secure than banks and electronic transactions because it can be used by those who do not have internet-connected accounts and aren't technologically proficient. COD is also preferred since customers can verify the quality of the products prior to buying them. The non-banking service provider performs this service at a low cost and then returns the remaining amount of the payment to the seller. This method ultimately benefits everyone. Dangdang is Amazon and JD.com are the largest third-party payment services that are not bank-based providers.



The downside of this system is that a third-party has to be compensated to provide the items and to handle payment. A third party in the transaction could prolong the time taken for the seller to receive customers' payment, and also reduce the amount of revenue generated from these transactions due to third party transaction or service fees. In the end, it is better for both the buyer and the seller to eliminate the third participant from the transaction. This will streamline the delivery of goods and services , as well as the movement of the payments from the purchasers to sellers.



Financial Sector Innovation Driven by SME


In 2015, more than 60% of the trade with foreign countries was managed by mainland Chinese SMEs. They are the primary reason for rapid development in e-commerce and fintech solutions for cross-border ecommerce problems. Today, SMEs from mainland China are driving the disruption to the Chinese banking system and changing the way that payments are made within and outside China. In addition, since SMEs focus on particular niches that big established companies cannot handle in the past, there will be more pressure on the Chinese banking system to simplify and streamline commercial transactions, so smaller, less established companies can grow and meet the rising demands of China's expanding commercial sector.

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As the Belt Road Initiative expands, large corporations have to focus on satisfying the demands of the Chinese government in order to do business with them. SME's will likely be the ones who serve the needs of those who are less wealthy, but more strong. They need banking products which are accessible to them and their clients.



B2C, Fintech


Aleta Planet's cross-border solution, which delivers payments faster than traditional bank transfers and is more simple and convenient is expected to continue to boost local industry growth. The growth of the fintech and SME sectors will benefit from these technological advancements. These technological advances are also driving cross-border B2C ecommerce spending. This is in turn increasing the demand for Fintech solutions for B2C transactions.



It is crucial to ensure that there are no barriers in the flow of goods and money through China's borders. Chinese mainland economy transitions to being more consumer-oriented. Chinese suppliers who receive payments through platforms like AP-1 Business have more confidence of receiving their payments on time.



Fintech: The New Normal


Fintech companies have realized the need for better services. Clients, including small and medium-sized enterprises and e-commerce sellers as well as newly established tech companies, are looking for financial and other services that can improve their lives. Fintech companies are combining technology as well as finance and creativity to manufacture new solutions that ease the restrictions placed on SMEs and make it simpler for them to conduct business.



The purpose of the firms is to make cross-border B2B payment more readily available, easier to manage more manageable, less troublesome and is a preferred method to conduct business in China. Aleta Planet is one of the firms leading the charge. Aleta Planet created a system that makes use of the UnionPay network to facilitate transactions into and out of China. This makes regular foreign payments sustainable.



AP-1 Business


AP-1 business is a type of digital account that can be used by business entities from outside China. AP-1 business delivers transactions in T+1. This is the most beneficial aspect of AP-1 business. Bank transfers can generally be made in T+5 and more and AP-1 Business is available in T+1. Because AP-1 Businesses rides on the UnionPay Network, the money can be transferred swiftly and securely from an offshore UnionPay Account (AP-1 Business) and then to an onshore UnionPay Account that is owned by the company that is providing the service.



There are a few other benefits of using AP-1 Business. Foreign businesses doing business with Chinese firms will find all the AP-1 Business benefits attractive.



The Key Features


All-in-One Service


AP-1 Business offers a one-stop service that lets customers send, receive and process money transfer. It is able to be used by foreigners and there are no restrictions on owners and shareholders from outside the country for business accounts opened with AP-1 Business. With AP-1 Business, companies can open business accounts in Singapore without the need for directors of the company.



As a part of as a part of the UnionPay platform, AP-1 Business has the capability of providing superior customer service and all-in-one solutions to its customers. All Chinese banks and financial institutions are eligible to use the UnionPay platform. AP-1 Business eliminated the middleman through the use of the platform.



In contrast to banks that must transfer funds through intermediary banks lenders like other banks, funds transferred through AP-1 Business can be transferred directly to the account of the beneficiary. AP-1 Business allows users to withdraw cash at ATMs across the world. Its system is backed by Huawei Pay and Visa. In the second quarter of 2021 this ATM cash withdrawal facility will be available.



Attractive rates of foreign exchange


Another extremely attractive feature of AP-1 Business is the forex (FX) rates. AP-1 Business offers FX rates of SGD up to RMB for China through the UnionPay network. The rates for FX are extremely attractive considering that some of the online payment services offer higher rates for FX, however they charge a fee to transfer money across borders. We guarantee that our customers receive the best FX rates for cross-border transactions when they are needed.



There aren't any minimum balances required or deposits


Contrary to other business accounts AP-1 Business doesn't require customers to maintain a minimum balance or make minimum deposits. Some SMEs could continue their operations even though they had to make deposits and maintain an account with a minimum balance during the COVID-19 pandemic. They have also been able to recover slow or not at all. In this way, AP-1 Business aims to provide modern-day solutions to financial issues that are not dealt with by the dominant banking industry.




AP-1 Business customers can make international payments to China by using the AP-1 Business Virtual Card. The card operates in the same manner as an prepaid debit card, in which the purchase and payment are taken directly from the account's balance.



Using the AP-1 Business Card allows customers to avoid the lengthy and time-consuming process of clearing payments in the first place, providing documentation, or other steps required by banks to facilitate transborder transactions via bank transfer. Ultimately, this is an ideal situation for SMEs engaged in e-commerce and cross-border B2B transactions.


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The Roadmap of Aleta Planet for the Future


Aleta Planet, like other fintech companies, has experienced significant growth and continues develop with the Chinese economy grows and more online commerce transactions rise. While the COVID-19 pandemic dampened the Chinese economy, China has been the sole nation not to just get back to normal levels, but also to see economic growth.



Conclusion


The three systems for processing commercial transactions in China are not flexible enough and are not accessible to individuals from outside China. The AP-1 business platform from Aleta Planet helps solve this problem by providing offshore companies with easy access to Chinese goods and services. The simplified access allows businesses to grow Chinese SME's and create a consumer economy in China's mainland. It also helps facilitate transactions in finance between B2Bs (and B2Cs) through more technologically advanced payment systems. AP-1 is the leader in this sector that assists buyers and sellers to get around China's trade bottleneck and grow and expand their business.



Homepage: http://www.aletaplanet.com