China unveils new Internet payment protocols
During an April 18, 2009 speech at the Boao Forum for Asia, Xi Guohua, Vice Minister MIIT, highlighted the importance of the Internet on the Chinese economy. Xi noted that e-commerce has great potential in China, but currently China lacks two essential conditions:
- An Internet payments credibility system and
- An online certification system to enable wide promotion of online businesses.
To emphasize the need for a new system, Xi Guohua quoted from a recent survey; “…more than 80 percent of Chinese Internet users were worried about the security of their online personal information even though they had installed anti-virus software on their computers.”
Only two days after Guohua’s speech (April 20, 2009), new information on China’s e-commerce “credibility and certification” programs has emerged via a notice from the People’s Bank of China (PBC). Apparently the PBC will help to administer a new registration and certification program developed by China’s Ministry of Finance and the China Banking Regulatory Commission. The PBC notice states that all non-financial organizations that are engaged in payment and settlement businesses in China, including Internet platforms (e.g. Tencent, Alipay, iTunes) must fully register under the new guidelines before July 31, 2009.
How does this impact Apple and the iTunes Store? Details on the program are vague, so it’s hard to say. However, if this new system brings Chinese citizens greater comfort over Internet commerce, then it could be very positive.
There are untold millions of Chinese consumers who avoid Internet transactions altogether. Whether jaded over prevalence of PC viruses or miss-trust of putting financial data on a website, the vast majority in China do business in cash only.
As former Beijing resident and iPhonAsia reader Steve M explains;
“Very few people own an international credit card in China, and if they did, they would never use their credit card on the Internet – they do not trust the Internet for any transactions.” …. “The concept of buying legitimate apps in an online store is still a new idea. I predict Chinese consumers will want as many cool apps on their iPhones as possible when they find out how easy it is to download them from the iTunes Store. But first, Apple needs to ‘localize’ the store for China* by making the site in Chinese and changing the payment method.” …
“Starbucks is very popular in Beijing. Tens of thousands of Beijingers pay for lattes everyday in a country that is known for its tea. For the price of one latte, Starbucks customers could easily buy 3 or 4 apps in the iTunes store. The demographics of Starbucks customers are similar to the demographics of people who buy iPhones in China.”
iPhonAsia is cautiously optimistic that this new e-commerce program in China may help to address some of the Chinese consumers’ concerns about buying online. However, Apple and China Unicom may need to do more – they may need to expand the list of authorized credit/debit cards (iTunes currently accepts only internationally recognized cards) and take further marketing, promotion and logistical steps, such as:
- Promoting the ease of use and security of e-commerce via iTunes.
- Getting the word out to Chinese consumers that viruses don’t infect Apple products the way they do Windows devices. Seriously, the frequency of “PC blue-screens of death” has tainted all hardware in China and Apple may need to help paranoid consumers understand that you don’t get viruses on iPhones, iPod Touches or Macs.
- Expand iTunes credit card options to include more regional cards.
- Fully localize the iPhone, iPod Touch and iTunes China Store**
- Include several “for China” apps on a new special for China iPhone (e.g. Youku or Tudou versus Youtube)
*NOTE: The Apple iTunes China store has been available for several months now (app downloads to iPod Touch only for now). If you go down to the bottom of your iTunes Store window you can select from stores in any available region, including Hong Kong and China. If you peruse a store outside your region, don’t forget to reset your store to your home location or you won’t be able to make any iTunes purchases.
**NOTE: Apple and firms such as Extend Logic and Loc Labs appear to be working diligently on efforts to localize and internationalize iPhone and the iTunes China Store. Look for an Apple China iTunes Store makeover … soon.