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Rise of the Asian Tiger

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Ralf Gladis
By Ralf Gladis, CEO, Computop
If you are looking for growth markets in e-commerce, look no further than China.  Once dismissed as too difficult to break into, the Chinese market is now more accessible to retailers than ever before. Ralf Gladis

With more than 500 million Internet users, China boasts an e-commerce market which grew by 29 per cent in 2011, to a total volume of 23 billion USDs. At Computop alone, we have seen a 200 per cent growth in demand for Chinese payment solutions from European and US retailers in the past year.

The Chinese Market
The Chinese government’s currency policy is to increase domestic consumption.  And, due to increasing inflation, Chinese consumers are actually spending a lot – both online and offline. However, knowing where to start to break into an unknown market can be daunting, especially when there are significant cultural, political and economic differences – so here are a few insights…

The leading payment scheme for e-commerce in China is Alipay which is part of the Alibaba Group who also runs B2C and C2C marketplace Taobao, similar to eBay.   With 48 per cent of market share, Alipay is very much comparable to PayPal. It claims to process 34 million payment transactions per day for 650 million registered Chinese consumer accounts. Given that Europe only counts around 320 million inhabitants, the fact that Alipay grew from 550 million to 650 million consumer accounts in 2011 demonstrates the sheer size and growth of e-commerce in China.

The most popular products bought online in China are without a doubt day to day goods such as perfumes and toiletries. Shoe and fashion shops, software downloads and games are very successful, too. Due to low average incomes, high priced goods like electronics or furniture are not always that easy to sell. However, we are seeing an increasing trend towards Chinese consumers saving and investing in prestigious western brands, even if they are expensive.

Successful e-commerce requires a good, solid infrastructure and China actually provides just that. Logistic services are fast and affordable, even to remote areas, and whilst broadband Internet access is relatively fast in big cities, many consumers use their mobile devices to access the Internet from anywhere.

Little differences of note
Unlike in Europe, having a ‘mobile shop’ is considered a key success factor in China. You will find other little differences when conducting business in China too.  For instance, don’t expect Chinese consumers to respond quickly to e-mails – it could take weeks. If you want to get a message across quickly you should integrate messaging services to your shop. Many online shops in China use messaging services like QQ for order confirmations or tracking services.

Another area of difference is payment. Consumers are creatures of habit when it comes to money and unlike in the western world, credit cards are not popular for buying online in China. Visa and MasterCard have no footprint there and even the credit cards from China Union Pay (CUP) are not thriving either. There are several reasons for this: Firstly because Chinese consumers have to specifically apply to use their credit card for e-commerce. Secondly, if they do, they have to pay a fee for every transaction they process over the Internet. Then, last but not least, many Chinese banks redirect their credit card customers to their online banking website. After putting in the card data, Chinese cardholders then need to go through a full online bank transfer process in order to finish the card payment.  It takes an awful lot of time and patience.

As a direct result of these challenges, Chinese consumers have learned to love comfortable wallet payments, such as Alipay. The second largest wallet provider here, with 20 per cent market share, is tenpay.  Tenpay is part of the Tencent Group which is very successful in providing value added Internet and telecom services like QQ.com or QQ Games. Given its origins, Tenpay is good to address younger people and the gaming community.

There are other smaller players such as China Union Pay or 99bill, each of which cover market shares of around eight to nine per cent.

Opportunities and Challenges
Given that the UK economy – and UK e-commerce sales – are slowing down, retailers should have a closer look at the growth opportunities available in Asia. If you sell valued brands or day-to-day goods or services, there is a fast growing market for prestigious European products.

You will most likely encounter challenges, but these can all be overcome.  For instance, some retailers report that slow Internet connections hinder the download of product images. However, this can be overcome by service providers like CD Networks or Datapipe, who offer a kind of distributed proxy service in order to reduce the distance that data has to travel, providing a swift user experience for consumers.

Other challenges that are easily resolved are logistics, tax regulation and tariff calculations. In order to save time and effort, retailers can work with full service providers like arvato, eShop World, Hermes or Moduslink. They provide tools and services that calculate duties and tariffs in an instance. Once you have these lined up, it is relatively easy to test how Chinese consumers will react to your products or services.

And, if you decide to build a legal entity in China, Hong Kong is the perfect place to start. It still provides legal stability and a legal system similar to the UK. Make no mistake: A Chinese national would never deem a Hong Kong company to be Chinese. However, despite this, the Closer Economic Partnership Agreement (CEPA) between mainland China and Hong Kong not only allows retailers to run operations in mainland China without a state owned partner, it also provides significant tax advantages.
It has never been easy to reach out to new shores, however, the opportunity is there for the taking. Provided the product fits the market, the booming Chinese economy promises a bright future and will be worth the effort for many retailers. The sleeping Asian tiger of old – has most definitely awakened.

 
 
 

Finance

Bank of England’s Haldane says inflation “tiger” is prowling

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Bank of England's Haldane says inflation "tiger" is prowling 1

By Andy Bruce and David Milliken

LONDON (Reuters) – Bank of England Chief Economist Andy Haldane warned on Friday that an inflationary “tiger” had woken up and could prove difficult to tame as the economy recovers from the COVID-19 pandemic, potentially requiring the BoE to take action.

In a clear break from other members of the Monetary Policy Committee (MPC) who are more relaxed about the outlook for consumer prices, Haldane called inflation a “tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months”.

“People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely,” Haldane said in a speech published online. “But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”

Haldane’s comments prompted British government bond prices to fall to their lowest level in almost a year and sterling to rise as he warned that investors may not be adequately positioned for the risk of higher inflation or BoE rates.

“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” Haldane said.

He pointed to the BoE’s latest estimate of slack in Britain’s economy, which was much smaller and likely to be less persistent than after the 2008 financial crisis, leaving less room for the economy to grow before generating price pressures.

Haldane also cited a glut of savings built by businesses and households during the pandemic that could be unleashed in the form of higher spending, as well as the government’s extensive fiscal response to the pandemic and other factors.

Disinflationary forces could return if risks from COVID-19 or other sources proved more persistent than expected, he said.

But in Haldane’s judgement, inflation risked overshooting the BoE’s 2% target for a sustained period – in contrast to its official forecasts published early this month that showed only a very small overshoot in 2022 and early 2023.

Haldane’s comments put him at the most hawkish end among the nine members of the MPC.

Deputy Governor Dave Ramsden on Friday said risks to UK inflation were broadly balanced.

“I see inflation expectations – whatever measure you look at – well anchored,” Ramsden said following a speech given online, echoing comments from fellow deputy governor Ben Broadbent on Wednesday.

(Editing by Larry King and John Stonestreet)

 

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Finance

Bitcoin slumps 6%, heads for worst week since March

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Bitcoin slumps 6%, heads for worst week since March 2

By Ritvik Carvalho

LONDON (Reuters) – Bitcoin fell over 6% on Friday to its lowest in two weeks as a rout in global bond markets sent yields flying and sparked a sell-off in riskier assets.

The world’s biggest cryptocurrency slumped as low as $44,451 before recovering most of its losses. It was last trading down 1.2% at $46,525, on course for a drop of almost 20% this week, which would be its heaviest weekly loss since March last year.

The sell-off echoed that in equity markets, where European stocks tumbled as much as 1.5%, with concerns over lofty valuations also hammering demand. Asian stocks fell by the most in nine months.

“When flight to safety mode is on, it is the riskier investments that get pulled first,” Denis Vinokourov of London-based cryptocurrency exchange BeQuant wrote in a note.

Bitcoin has risen about 60% from the start of the year, hitting an all-time high of $58,354 this month as mainstream companies such as Tesla Inc and Mastercard Inc embraced cryptocurrencies.

Its stunning gains in recent months have led to concerns from investment banks over sky-high valuations and calls from governments and financial regulators for tighter regulation.

(Reporting by Ritvik Carvalho; additional reporting by Tom Wilson; editing by Dhara Ranasinghe, Karin Strohecker, William Maclean)

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Britain sets out blueprint to keep fintech ‘crown’ after Brexit

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Britain sets out blueprint to keep fintech 'crown' after Brexit 3

By Huw Jones

LONDON (Reuters) – Brexit, COVID-19 and overseas competition are challenging fintech’s future, and Britain should act to stay competitive for the sector, a government-backed review said on Friday.

Britain’s departure from the European Union has cut the sector’s access to the world’s biggest single market, making the UK less attractive for fintechs wanting to expand cross-border.

The review headed by Ron Kalifa, former CEO of payments fintech Worldpay, sets out a “strategy and delivery model” that includes a new billion pound start-up fund and fast-tracking work visas for hiring the best talent globally.

“It’s about underpinning financial services and our place in the world, and bringing innovation into mainstream banking,” Kalifa told Reuters.

Britain has a 10% share of the global fintech market, generating 11 billion pounds ($15.6 billion) in revenue.

“This review will make an important contribution to our plan to retain the UK’s fintech crown,” finance minister Rishi Sunak said, adding the government will respond in due course.

The review said Brexit, heavy investment in fintech by Australia, Canada and Singapore, and the need to be nimbler as COVID-19 accelerates digitalisation of finance all mean the sector’s future in Britain is not assured.

Britain increasingly needs to represent itself as a strong fintech scale-up destination as well as one for start-ups, it added.

The review recommends more flexible listing rules for fintechs to catch up with New York.

“Leaving the EU and access to the single market going away is a big deal, so the UK has to do something significant to make fintechs stay here,” said Kay Swinburne, vice chair of financial services at consultants KPMG and a contributor to the review.

The review seeks to join the dots on fintech policy across government departments and regulators, and marshal private sector efforts under a new Centre for Finance, Innovation and Technology (CFIT).

“There is no framework but bits of individual policies, and nowhere does it come together,” said Rachel Kent, a lawyer at Hogan Lovells and contributor to the review.

Britain pioneered “sandboxes” to allow fintechs to test products on real consumers under supervision, and the review says regulators should move to the next stage and set up “scale-boxes” to help fintechs navigate red tape to grow.

“It’s a question of knowing who to call when there’s a problem,” Swinburne said.

($1 = 0.7064 pounds)

(Reporting by Huw Jones; editing by Hugh Lawson and Jason Neely)

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