HONG KONG — The numbers are in “holy *$#%” territory.
“The numbers” are for e-commerce sales in China, and they are astounding. In the first two months of 2016, China’s online retail sales hit $98.2 billion, an increase of 27% over the previous year. That puts it on pace to hit around $590 billion for the full 2016.
In comparison, according to the Department of Commerce, total e-commerce sales in the United States last year was about $342 billion, a year-over-year increase of 14.6%, good — but not China-good.
And the driver of this e-commerce growth in China is … fintech. David Su, chairman, YTO Cargo Airlines Co. Ltd., which provides express delivery to Alibaba and other Chinese e-commerce ventures, said it is Alipay and other payments ventures that are driving the growth on Alibaba, Taobao, and other e-commerce companies.
“Alipay and epay is making the next generation that much easier to buy everything via cell phone,” Su said at a conference here yesterday.
It should be noted that Alibaba now owns 20% of YTO.
But here’s the rub: China’s e-commerce opportunity is somewhat “over,” because its barrier to entry is significant. Cainiao is Alibaba’s logistics arm, and it has created an IT platform that integrates with Alipay and feeds crucial logistics details not just to consumers, but to parties to the e-commerce fulfillment. It appears that e-commerce startups off the Cainiao platform or other e-commerce networks will have an extremely difficult time making headways into the Chinese market.
But fret not, my cherished fintech friends. Opportunity is begging for your attention — and that opportunity goes by the name Payments in India. There is currently no “Alipay for India,” and one is desperately needed, because without it, e-commerce cannot hit China-like levels there, despite a population of 1.3 billion in India.
The problem is technical. IT infrastructure in India is where China’s was 10 years ago, market participants said yesterday. And without the payments apparatus, 70% of e-commerce transactions are cash on delivery, which is so 1980s infomercial. This is despite the fact that India is fully “smartphone-ed.”
“The mobile revolution is fully on in India,” said Rajesh Subramaniam, executive vice president, global marketing and communications, FedEx Services, which offers an e-commerce payments solution.
In China, what’s happening now is payments solutions are starting to branch out beyond the Middle Kingdom. What has largely been lost on the Western fintech sector (and certainly on Bank Innovation) is the import of Alipay’s ePass venture, which was launched in late 2014. Bank Innovation has learned that ePass is now working with Macy’s to facilitate purchases from those inside China. Essentially, when a Chinese local wants to buy something from macys.com, ePass takes over the checkout, arranging the payment through Alipay and the logistics through Cainiao.
It is fair to say that ePass will become a major facilitator of Chinese transactions for US e-commerce retailers. We are hearing about major US brands looking to hook up with ePass. To quote an ancient Chinese proverb, “Be not afraid of growing slowly, be afraid only of standing still.”1 - Reader Likes This Post