Collaborating with local players is the most common way into the market—Visa CEO Charles Scharf last week mentioned the network is collaborating with companies inside China as part of the card network’s expansion strategy. And Apple is working with local processors to offer Apple Pay in China.
But connecting with local partners is itself no easy task, requiring extensive integrations.
Alpha Payments Cloud says hosting and Web-based technology provide one way to make it easier to build a payments business in China. The Dublin-based Alpha has partnered with WeCollect, a Hong Kong-based company, to build what amounts to a railroad roundhouse for e-commerce transactions and enabling technology.
"China is a tough market to get into," said Ronan McDonnell, marketing coordinator for Alpha. "WeCollect has been operating as a [payment service provider] on the inside for a long time."
Alpha Payments provides third party payment, risk and e-commerce technology for merchants and banks, and WeCollect specializes in connecting cross border merchants and payment service providers to Chinese consumers and business-to-business markets.
China has long been closed to foreign payment companies. The country recently began loosening those restrictions, though the rules still in place will likely present years of work for card networks such as MasterCard and Visa. Other companies such as PayPal have also found it slow going in China, leaving most of the market penetration to financial technology vendors.
"In the case of the Chinese market that has traditionally been closed and is only really just recently opening up in the last couple of years, a local partner is critical due to the political dynamic in that country," said Michael Moeser, director of payments for Javelin Strategy & Research. "The advantage of cloud-based solutions is that they allow the ability to immediately 'plug and play' a solution into an existing operation and quickly reach scale."
Alpha Payments Cloud and WeCollect will offer a Web-hosted and delivered white label suite that includes access to China UnionPay-branded checkout pages, debit and credit card payments, bank account transfers, checkout pages integrated into the merchant's website, mobile payments, and security technology such as China's standardized verification product, fraud screening and "know your customer" requirements. Integrations to WeChat and Alipay are also available.
"WeCollect offers Chinese payment methods such as UnionPay, and they already do cross border remittance," McDonnell said, adding Alpha has an existing payment agreement with WeChat that it can add to the mix.
The Alpha WeCollect collaboration is also designed to meet the often challenging requirements from countries that have large e-commerce markets but mostly closed payment systems--like China, Russia and India. These countries typically have regulations requiring local processing, or carry huge fees for outside processing or apply pressure to use national payment networks.
"The card processing will be done in China under our system," McDonnell said. "So we're not moving into China from the outside, but integrating to the inside."
The cloud serves as a middleware layer that connects merchants, banks and processors, and Alpha's fees are generally determined by what services the clients access. The layer is designed to avoid the individual integrations, which McDonnell argues are time consuming, costly and difficult to execute from outside of the country.
"By bundling all of this together it's a one stop shop for Chinese e-commerce," McDonnell said.
Other cloud services, such as Microsoft Azure, can also perform the complex local integrations required to enter a market that has formal and information constraints, said Bernard Golden, a cloud computing consultant. But he cautioned the strategy is not easily transferrable to all markets—an integration strategy that works in China may not in India, for example.
"It's not a cookie-cutter situation, but it's a good approach and is probably more efficient than trying to do it yourself," Golden said.