Understanding E-Payment Services in Traditionally Cash-Based Economies: The Case of China

Understanding E-Payment Services in Traditionally Cash-Based Economies: The Case of China

Xiaolin Li (Towson University, USA), Dong-Qing Yao (Towson University, USA) and Yanhua Liu (Wuhan College of Economics and Management, China)
DOI: 10.4018/978-1-61520-611-7.ch050
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Abstract

Electronic payment or e-payment refers to any payment transactions conducted electronically. In narrow terms, it usually refers only to online payment. E-payment is a crucial part of e-commerce. It increases transaction speed, improves merchants’ liquidity, and enhances buyers’ online shopping satisfaction. E-payment also reduces transport costs, robbery, and counterfeiting of fiat cash (Panurach, 1996). However, e-payment development in emerging economies—most of which rely heavily on cash for e-commerce transactions—has not kept up with advances in e-commerce. As a result, inefficient payment methods have become a bottleneck of further e-commerce growth.
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Major Payment Methods For Online Purchases

Payment mechanisms for e-commerce transactions are more diversified in China than in countries with high credit card penetration. A variety of E-commerce payment methods are concurrently used in China. The most common ones include e-payment, cash upon receipt of goods, postal payment, and bank transfer (Table 1).

Table 1:
E-Commerce payment methods (Source: Ciweekly, 2006)
E-Commerce Payment MethodsPercentage of Merchants
E-Payment60.2%
Cash upon Receipt of Goods39.4%
Postal Payment12.3%
Bank Transfer6%
Others2.1%

Key Terms in this Chapter

ChinaPay: sponsored by China Banking Association, is a pioneer of China’s bankcard-driven e-payment services.

Cash upon receipt of goods: a payment paradigm in which the buyer orders online, the seller physically delivers the goods to the buyer, and the buyer pays cash upon receipt of the goods.

Direct online payment: An online payment transaction that involves only a buyer, a merchant, and a bank.

Electronic payment: refers to any payment transaction conducted electronically.

Third-party online payment: An online payment transaction that involves a third party as well as a buyer, a merchant, and a bank.

Bank transfer: a payment mechanism in which payment transactions are made by transferring fund between bank accounts of the seller and buyer.

Postal payment: a payment method where payment transactions are made via the postal services.

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