Notes

China's Cross Border B2B Payments are Disrupted

China is growing by expanding its presence into several industries around the globe. It's growing, and there is a growing need to resolve the B2B cross-border payment bottleneck that is a major problem for the current system of payments. For medium and small-sized enterprises that operate across borders, the B2B payment problem is a major problem. This is because of China's laws. This B2B payment bottleneck is affecting businesses doing business with SMEs in China and overseas.



Monopoly of Chinese Bank B2B Payout Monopoly


There are three options available for making B2B payments to China. In the first place, the bank transfer (also known as telegraphic transfer) is the most popular. Even though it's possible to send foreign funds to Chinese companies with headquarters in mainland China, telegraphic transfers are the most well-known method. This method is especially difficult for SMEs to access because they may lack the documents, capital, and other items that are needed to authorise transactions through banks in China and also payments that are made to China as well as it's a very difficult process to plan for the process of a telegraphic transfer.



The typical time for bank transfers is between five and seven business days from the time of transaction. The bank receiving the funds may require paperwork and personnel to be delivered to China once funds are received.



While SME's and newly established companies can be able for receiving and sending funds via telegraphic transfer there is the issue of Chinese banks blocking access to smaller financial institutions as well as nonbanking companies for bank transfers. There are at present 4500 banks in China that are able to send and receive bank transfers.



cross border B2B Payments is a significant number, but it does not provide the market with the necessary resources. The innumerable transactions that fly across China's borders cause a tangle in the system, which is unable to provide the needs of the market.



Electronic Payments


The use of electronic payment has increased in China. In 2018, 92% of urban customers and 47% of rural customers in China used smartphones to pay for purchases. The main service providers used include WeChat Pay and Alipay. The convenience of these transactions is unparalleled. Simply scan the QR code on the website of the seller, and then pay via the buyer's mobile phone.



These apps allow merchants to sell products to Chinese tourists from countries other than China. Indeed, the acceptance of electronic transactions increases the chance that Chinese tourists are likely to purchase something, and spending by them could be 25% of brands sales, in millions of dollars in a given year. The problem is that retailers must join the Chinese payment system and get their sales processed by the system. If a company has fewer contacts and/or business activity in China this may pose a significant challenge.



Cash on Delivery (COD).


The most frequently used method of payment for Chinese consumers is cash-on-delivery. It is more well-known than electronic payments or transfer to banks, since it is able to be utilized by people with no online accounts or don't have the necessary technical knowledge. COD is also a good option because customers can check the quality of products before buying them. This service is offered by a non-banking provider and the seller returns the balance of the purchase. So, ultimately everyone wins when using this system. Dangdang is Amazon and JD.com are the two largest third party non-banking payment providers.



However, this method has its own drawbacks. The third party involved in the transaction must be compensated to deliver and manage the payments. The involvement of a third party in the transaction can increase the amount of time needed for the seller to take in customers payment and decrease the income from these payments due to third party transaction and service charges. Ultimately, it would be better for the customer and sellers to eliminate the third party from the transaction and streamline the delivery of goods and services and the transfer of payments from the buyers to the sellers.



SMEs are the engine behind Financial Sector Innovation


Over 60% of international trade was created by mainland Chinese SME's in 2015. They were responsible for the rapid growth of e-commerce and fintech solutions for issues with cross-border ecommerce. In the present, China's mainland SMEs are the major force driving the disruption to the Chinese banking system, as well as revolutionary changes to how cross border payment transactions are conducted within and outside of China. Additionally, as SMEs serve particular niches that big established companies are unable to serve in the past, there will be greater pressure on the Chinese banking system to streamline and simplify commercial transactions so that smaller less established firms can expand and meet ever-growing demands of China's rapidly growing commercial sector.



In the end, as the belt road initiative gain more momentum and large firms are required to meet the exacting requirements of the Chinese government to run its business, SMEs will be the ones catering to the needs of the poor and powerful. Therefore, they require banking services that are easily accessible to them and the populations who they are serving.



B2C and Fintech


In the longer term Aleta Planet's solution for the cross border bottleneck problem, its delivery of payments is faster than traditional bank transfers and more simple, easy transactions is fueling growth in local industries. These developments are beneficial to the financial technology as well as SME industries. In addition, these technological advances have a positive impact on B2C international spending and are allowing for the development of fintech-based solutions that can be used to facilitate B2C transactions.



In the course of how the mainland Chinese economy evolves into more of a consumer economy it is essential to ensure that there are no obstructions to the flow of money and goods across the Chinese border. Chinese suppliers that receive payment through platforms such as AP-1 Business have more confidence in getting their payments in a timeline manner.



Fintech to the Rescue


Fintech companies have noticed a gaps in the market for services. Their customers, especially small- and medium-sized businesses, online sellers, as well as newly-established tech companies, are clamoring for more efficient services and financial solutions. Fintech firms combine technology as well as finance and inventiveness to develop new solutions that ease the constraints placed on SMEs and make it easier for them to operate.



The goal of the firms is to make cross border B2B payments more accessible, easier to manage as well as less stressful and is a preferred method to conduct business in China. Aleta Planet is one such firm that is leading the trend. Aleta Planet created a system that makes use of the UnionPay network to make payments to and from China. This ensures that regular foreign transactions are sustainable.



AP-1 Business


AP-1 Business is a business account that is accessible to businesses outside of China. The business account can make payments in T+1. This is the best characteristic of AP-1 business. Contrary to banks, they typically allow bank transfers to be made in T+5 or more. This quick access and the certainty of payments is because The AP-1 Business account is connected to the UnionPay network. As such, the payment is made from an offshore UnionPay account (AP-1 Business) to an onshore UnionPay account belonging to the provider in China.



AP-1 Business comes with a variety of benefits. All of AP-1 Business' benefits make it extremely appealing to foreign businesses doing business with Chinese firms.



Key Features


All-in-One Service


AP-1 Business provides an all-in-one service that makes it easy for customers to send, receive, and process remittances. This service is available by non-natives. There are no limitations on shareholders or owners from outside the country regarding the opening of business accounts with AP-1 Businesses. AP-1Business permits companies to open business accounts without the need for directors.



Because it is a part of the UnionPay platform, AP-1 Business can provide exceptional customer service to clients. All Chinese banks and financial institutions are eligible to use the UnionPay platform. AP-1 Business has eliminated the middleman with this platform.



Unlike cross border B2B Payments which must transfer money via intermediary banks lenders like other banks, funds that is transferred through AP-1 Business may be directly transferred to the account of the receiver. AP-1 Business also permits users to withdraw cash from ATMs throughout the world. It is supported by Huawei Pay and Visa. In the second quarter of 2021 this ATM cash withdrawal service will be operational.



Attractive rates of foreign exchange


Another attractive aspect of AP-1 Business is the forex (FX) rates. AP-1 Business offers the most direct rates for FX (SGD to RMB) for China through the UnionPay network. These rates of exchange can be reasonable when you consider the fact that a lot of online payment services provide lower rates for FX, and require customers to pay a fee for the transfer of money across national borders. The AP-1 Business guarantees that its customers receive the highest FX rates for cross-border transactions.

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There are no minimum account balances or deposit requirements.


Unlike other business accounts, AP-1 Business doesn't require customers to keep a minimum account balance or to make minimum deposits. A few SMEs were able to keep their businesses running even though they had to deposit money and keep an adequate balance throughout the COVID-19 epidemic. They did not recover as quickly and, in some cases, not even. AP-1 Business aims for modern solutions in finance that cannot be available through the current banking industry.




AP-1 Business customers can make international payments to China by using the AP-1 Business Virtual Card. The card works in the same manner as one that is pre-paid for debit cards, with purchases and payments taken directly from your account.



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Using an AP-1 Business cards allows the customers to skip the long and cumbersome process of clearing payments or submitting documentation and other procedures required by banks for international bank transfer transactions. This is a win-win-win for SMEs that participate in ecommerce and cross-border B2B payments.



Aleta Planet's Roadmap for the Future


Aleta Planet, like other fintech companies, has experienced immense growth and continues to develop as the Chinese economy grows and more e-commerce transactions increase. Despite the fact that COVID-19 pandemic had a negative impact on the Chinese economy, China was the only country to experience an increase in economic growth that was normal and an improvement in economic conditions.



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 system from Aleta Planet helps solve this issue by giving offshore businesses ease of access to Chinese goods and services. This simplified access helps to grow Chinese businesses and a more consumer-oriented 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 market leader in this field aiding sellers and buyers overcome the bottlenecks in commercial transactions in China and to exercise and grow their business.



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