Prepaid Cards and Stored-Value Account in China 2010
Maverick China Research, November 2010, Pages: 68
Electronic payments in China are a relatively new phenomenon. Even as China's economy surged in the 1980s and 1990s, payments were predominantly made in cash. It was not until the founding of interbank network China UnionPay (CUP) in 2002 that retail payments with bankcards became possible on a national level. While this was a major step forward, payment technologies were slow to appear, due to a combination of slow-moving domestic banks and the limited access allowed to international payment leaders.
This lack of legacy systems and inaction from major players provided opportunities for new companies and technologies. As China's economy continues to grow, consumers enjoy a wide range of payment options. This report is an overview of one group of services most commonly referred to as prepaid cards or stored-value accounts (SVA). These services have proven particularly popular in filling the gaps left by incumbent players, SVAs and prepaid cards are playing an increasingly important role in China's economy. In this report we cover the most important types of prepaid products, identify the parties benefitting from these services this sect from the growth, and examine the implications for the rest of China's payments sector. As millions of rural residents migrate to cities each year, China is becoming increasingly urbanized. Public transportation is essential to these fast-growing cities, and contactless card networks have are being adopted in many urban areas.
Following the lead of the Octopus Card network in Hong Kong's, many cities are exploring the use of public transit cards for retail payments at convenience stores, restaurants, and other shops. While no Mainland card has matched Hong Kong in the variety of merchants accepting the card, many are catching up quickly, and consumers are increasingly comfortable using the cards for a wider range of payments. Online payment providers have filled a gap in China's payment industry by facilitating online purchases in a country where credit cards are still relatively uncommon. These companies offer an alternative to cash-on-delivery and provide a secure link between merchants and consumer bank accounts. Some of the leading online payment providers, including AliPay and TenPay, have reached their position by being the payment method of choice for popular e-commerce sites under the same corporate umbrella (Alibaba and Tencent, respectively). Others, such as 99Bill, are working more independently to build networks between banks, merchants, and users.
Mobile subscribers are an even larger group than internet users in China, and the majority are prepaid users. Accounts are topped up with prepaid cards or vouchers originally intended to have just that single function. As the number of mobile subscribers in China has increased and users have grown accustomed to purchasing credit through cards, other networks have tapped into the system and have made payment through mobile prepaid cards available. These cards have become a popular form of payment with many in China's wildly popular online gaming community. Prepaid cards that provide consumers with discounts and deals with a network of merchants within a geographical location have also become popular. The card issuer essentially forms a buyer's club and participating merchants joining the network enjoy access to a larger customer base and increased brand awareness. Although there is no universal prepaid card yet, the top issuers have aggregated extensive networks of merchants representing a wide range of goods and services. Many chain stores and supermarkets in China have also begun issuing their own prepaid cards, both in the form of single-use and membership cards. Though these cards were previously considered illegal, they have become a common way to attract new customers and provide convenience to frequent customers. The Chinese government has also begun introducing a citizen identification card in several cities, which follows the same model and incorporates the same technology as the current transportation card networks to provide a universal payment and identification solution card.
Prepaid Cards and Stored-Value Accounts in China 2010: Opportunities in Retail, e-Commerce, Transportation, and Other Key Sectors is the most up-to-date and comprehensive study available on China's growing stored-value account and prepaid card markets. Released in November 2010, this is our first major report on this fast-growing and increasingly complex market, and it is essential reading for prepaid technology providers, payment processors, banks, merchants, and others interested in China's prepaid payment markets. In the past ten years, a wide range of prepaid payment solutions has evolved to serve many different consumers' needs:
- Public transportation cards, a necessity for hundreds of millions of urban residents, are increasingly being accepted as payment for non-transportation goods and services.
- Prepaid mobile phone top-up cards have become a popular form of payment with many in China's wildly popular online gaming community.
- The vast majority e-commerce payments in China are handled by third-party providers such as Alipay and 99Bill, whose stored-value accounts provide a convenient and secure link between merchants and consumer bank accounts.
- Chain stores and supermarkets in China are issuing their own closed-loop prepaid cards, which have become popular as gift cards -- especially with large enterprises looking to offer rewards and gifts to their employees.
- In some cities, merchant networks are establishing "buyer's club" prepaid cards in a semi-closed loop model, offering payment convenience and discounts as a way to attract new business.
- The Chinese government is testing a next-generation citizen identification card that incorporates payment technology and, if implemented nationwide, is expected to become a major force in China's payment sector.
Prepaid Cards and Stored-Value Accounts in China 2010 is researched and written in China but intended for an international audience. We examine the leading business models, profile key market players, identify investment and partnership opportunities, and forecast market growth in China for the coming years. Our analysis also draws from numerous in-depth interviews with leading online payment and prepaid industry experts.
1 Executive Summary
2 Stored-Value Accounts and Prepaid Cards
2.1 Definition and Scope of Stored-Value Accounts (SVAs)
2.2 Background of Stored-Value and Prepaid Products in China
2.3 Regulatory Overview of Stored-Value and Prepaid Products in China
3 Business Models
3.1 Semi-closed Loop Business Models
3.1.1 Third-party Online Payment
3.1.2 Transportation Card Networks
3.1.3 Prepaid Retail Card Networks
3.2 Closed Loop Business Model
4 Transportation Card Networks
4.1 Competitive Landscape
4.2 Key Transportation Card Networks in China
4.2.1 Hong Kong's Octopus Card
4.2.2 Beijing's Yikatong Card
4.2.3 Shanghai's Jiaotongka Card
4.2.4 Guangzhou's Yangchengtong Card
4.2.5 Shenzhen's Shenzhentong Card
4.2.6 Dalian's Mingzhuka Card
4.2.7 Wuhan's Wuhantong Card
4.2.8 Shanghai Highway Transportation Cards
5 Online Payment Providers
5.1 Competitive Landscape
5.2 Key Online Payment Providers in China
5.2.1 Alipay
5.2.2 99Bill
5.2.3 Tenpay
5.2.4 YeePay
5.2.5 Other Online Payment Providers
6 Telecom Operators
6.1 Competitive Landscape
6.2 Key Telecom Operators in China
6.2.1 China Mobile
6.2.2 China Unicom
6.2.3 China Telecom
7 Prepaid Card Networks
7.1 Competitive Landscape
7.2 Key Prepaid Card Network Operators and Issuers in China
7.2.1 Zihexin Property and Credit
7.2.2 Edenred (formerly Accor)
7.2.3 Lianhua OK
7.2.4 SmartPass
7.2.5 Other Prepaid Card Companies
8 Retail Networks
8.1 Competitive Landscape
8.2 Key Closed-Loop Prepaid Networks in China
8.2.1 Carrefour
8.2.2 PetroChina IC Card
9 Market Size and Market Forecasts
10 Conclusions and Closing Remarks
List of Figures:
Figure 1: China's Late Start: Banking and e-Commerce Milestones 1985-2010
Figure 2: Third Party Payment Provider License Requirements
Figure 3: Online Payment Business Model
Figure 4: Contactless Smartcard Business Model
Figure 5: Semi-closed Loop Prepaid Card Business Model
Figure 6: Closed Loop Prepaid Card Business Model
Figure 7: Statistical Overview of Transportation Card Networks
Figure 8: Major Transportation Card Merchant Networks
Figure 9: Yikatong Cards Issued, 2006-2009 (M)
Figure 10: Shanghai Public Transportation Cards Issued, 2006-2009 (M)
Figure 11: Yangchengtong Cards Issued, 2005-2009 (M)
Figure 12: Shenzhen Tong Cards Issued, 2005-August 2010 (M)
Figure 13: Dalian Mingzhuka Cards Issued, 2006-2009 (M)
Figure 14: Internet Users in China, 2001-H1 2010 (M)
Figure 15: Urban and Rural Internet Users in China, June 2010
Figure 16: Income of Internet Users in China, June 2010 (RMB)
Figure 17: Third-party Payment Providers in China
Figure 18: Products and Top-up Methods of Main Third-Party Payment Providers
Figure 19: Alipay Merchant Partners 2006-Q1 2010 (K)
Figure 20: Alipay Registered Users 2004-Q1 2010 (M)
Figure 21: Alipay Daily Transaction Volume, 2005-Q1 2010 (RMB M)
Figure 22: 99Bill Registered Users, 2005-August 2010 (M)
Figure 23: 99Bill Annual Transaction Volume, 2006-2009 (RMB B)
Figure 24: Tenpay Registered Users, 2005-2010 (M)
Figure 25: YeePay Registered Users, 2006-2007F (M)
Figure 26: Mobile Subscribers in China, 2000-H1 2010 (M)
Figure 27: China Mobile Subscribers, 2000-H1 2010 (M)
Figure 28: China Unicom Subscribers, 2000-H1 2010 (M)
Figure 29: China Telecom Subscribers, 2004-H1 2010 (M)
Figure 30: Prepaid Card Issuers in China
Image 31: Zihexin Shangtong Card
Figure 32: Zihexin Cooperative Merchants
Image 33: Edenred Employee Benefit Card and Gift Card
Figure 34: Bailian eMall Annual Transaction Volume (RMB M)
Image 35: Lianhua OK Card
Image 36: SmartPass Card
Figure 37: SmartPass Cooperative Merchants
Image 38: Carrefour Card
Image 39: PetroChina Prepaid Card
Figure 40: Cards and Accounts by Industry (M)
Figure 41: Transaction Volume by Industry (RMB M)
Figure 42: Nanjing Citizen Card
- Alipay
- 99Bill
- Tenpay
- YeePay
- China Mobile
- China Unicom
- China Telecom
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