There's been a lot of funding flowing into technology that targets the spending of Chinese travelers as they visit other countries. But this narrow use case isn't the only opportunity for investment and innovation.
CLSA Capital Partners has made an investment in Azoya, a Shenzhen, China-based e-commerce companies that manages payments and other functions on behalf of foreign retailers wishing to sell into China.
But recognizing the size is all that's easy. China's local payment ecosystem makes it hard for external companies to enter the market on a variety of levels, according to Azoya.
"There are numerous challenges, including technical, regulatory and marketing," said Franklin Chu, a New York-based managing director at Azoya. "We don't want the merchants to have to worry about that."
CLSA did not make an executive available for an interview, nor did it disclose the size of the investment.
Despite deregulatory signals from the Chinese government, even the largest U.S. payment brands, including Visa and Mastercard, have found it challenging to establish a local presence, partly due to local processing regulations designed to protect UnionPay's near monopoly over card payments. Also, fewer European and U.S. merchants have relationships with Chinese e-commerce company Alibaba and its digital transfer subsidiary Alipay than with more recognizable Western brands such as PayPal.
"The Chinese payments market has been rather closed for many years and has been notoriously difficult to enter for Western companies," said Zil Bareisis, a senior analyst at Celent. "While it's opened up a bit in recent years, it remains a complex market with dominant local players and its own set of regulations, so local partnerships can be crucial to success."
Azoya attempts to circumvent that by being the merchant of record for local transactions, then relying on its existing relationships with UnionPay and Alipay to smooth issues such as compliance and the original merchant's need for a relationship with a Chinese card issuer, UnionPay or Alipay. Chinese payments also have a complex transaction processing chain that can pose challenges for outside merchants.
"We maintain and manage every of their business in China, starting from creating a Chinese e-commerce site, processing the payments, customer service, tax and duties, etc.," Chu said.
Azoya also shares some of the risk. It collects payments in local currency, then converts the currency at the end of the month to pay the foreign merchant. Azoya's fees are based on the volume of successful transactions.
The company is hoping to benefit from the popularity of U.S. brands with Chinese consumers, an affinity borne of increasing international travel. Companies such as Planet Payment are adding technology to accommodate Chinese travelers, while Alibaba has made inroads at U.S. airports while its Alipay affiliate has been aggressively adding countries to its network. China's WeChat is expanding geographically to extend its merchant reach for Chinese travelers
Azoya's service has been available for about a month in the U.S. It did not release stats on adoption, but did release one retailer, Babyhaven, a parent and baby product retailer that plans to launch an e-commerce site in China by June.