PayPal’s launch of its China Connect service in collaboration with UnionPay, China’s bank card issuer, provides a direct link between China’s consumers and the online payment system’s network of global merchants. Research commissioned by PayPal this year shows that more than half, 52%, of China’s online shoppers plan to start or increase cross-border buying. Matthew Lee, vice president and general manager of PayPal North Asia, spoke with eMarketer’s Lisa Barron about how the new service will facilitate that process.
How is PayPal’s China Connect service promoting cross-border transactions?
China Connect is all about connecting foreign sellers to Chinese buyers. How do we do that? We have 10 million merchants around the world, and even though they want to sell to China, they don’t know how to sell to China. Many of them are not comfortable in terms of language, in terms of distance, in terms of knowing Chinese consumers. But technically, if they accept PayPal today, they are in the business of selling to China.
How do they connect with Chinese consumers? Step No. 1 is they put PayPal on their website with the China UnionPay logo. When consumers see the UnionPay logo, they will know this merchant knows about China and is willing to accept them as a buyer.
Why is your partnership with UnionPay so important?
UnionPay is the de facto electronic payment card in China, whether it is a credit card or debit card. Every bank issues a UnionPay card, period. Every Chinese consumer who has money in the bank has at least one card—there’s a total of about 4.7 billion UnionPay cards, even though China has only 1.3 billion people.
But the UnionPay card is not recognized or accepted by most foreign online merchants because it’s not easy to integrate and takes a lot of effort. PayPal has a connection to all these merchants, so by connecting PayPal with UnionPay, that’s equivalent to connecting billions of Chinese consumers to millions of merchants. The cost in the transactional currency is converted into Chinese RMB based on that day’s exchange rate and deducted from the UnionPay card.
How do Chinese consumers find out about overseas companies willing to accept PayPal?
We have built joint websites with other channels. For example, we have a joint website with UnionPay, we have a joint website with China Construction Bank, and we have a joint website with marketplaces like eBay that list the merchants selling to China through PayPal.
We also have contextual portals that will educate Chinese consumers about Western products and merchants. For example, we just launched a program with (online shopping tip site) SMZDM, (an acronym for “what’s worth buying” in Chinese). We have 20 merchants listed on their website with deals and offers. SMZDM will also write stories about PayPal and these merchants.
The company started as a community blog. Everybody chipped in with their different shopping experiences. When people started buying overseas, they looked at what friends and relatives shared. Eventually, it grew into a company that has 4 million users who are active buyers.
Merchants need to know about them. Merchants need to let Chinese consumers know about their products. They have to do marketing campaigns, direct marketing or marketing through PayPal.
What are you doing to handle the logistics involved in making deliveries to China?
We have several logistics partners. One of them is Borderlinx, and they will do direct or indirect shipping to China. With indirect shipping, they give a Chinese consumer a US warehouse address to use, and Borderlinx will take care of the last miles. The company has a partnership with DHL in China. They’ve been in China for a long time and have very good coverage there. They can also give a very good rate on shipping. It’s not as expensive as you think. It’s surprisingly economical shipping.
What type of consumer protection do you provide for customers in China?
People talk about consumer protection all the time. Ours, we think, is unique. If a consumer finds that the merchandise is not delivered or it isn’t the same as what was described, they can file a claim. And if we find that it’s legitimate, we will credit the consumer the purchasing cost and will return the shipping costs.
We also have 1,000 customer service reps in Shanghai who speak English and Chinese and can help if consumers or merchants have any concerns or issues.
Why did you decide to launch China Connect now?
Chinese purchasing power. China is the second-largest economy now, and China’s consumers have a desire for better lifestyles. They can easily buy domestically, but they want an upscale lifestyle, which they believe they can get from overseas. This is going to spread even more as lifestyle extends beyond just apparel, cosmetics or baby products. Now, we are seeing it include health food, electronics and other areas.
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