As the world’s largest eCommerce market, China appeals to global B2C and B2B brands alike. But China’s B2B eCommerce market is not as mature as the consumer space, and neither is its B2B payments. Multinationals that want to develop their B2B online commerce business in China will need to clearly define their strategy, including what payment solutions to use. By doing in-depth interviews with a dozen of the leading players in the digital B2B payment space, we identified the following insights that can help digital strategy leaders define a successful strategy:
- Banks own China’s digital B2B payments. While the total transaction value of B2B and B2C digital payments in China is the highest in the world, most digital payment innovations are confined to the consumer space. About 90% of B2B payments in China are processed by banks rather than by fintech firms such as Ant Financial and Tenpay. Whereas China has 4,500 banks that can accept B2B payments for merchants, only 243 non-banking payment providers are licensed to do so — and the gap is widening. In addition, the increasingly strict regulation of B2B payments keeps non-bank providers at bay.
- Smaller banks and fintech payment providers are shaking up the payment landscape. The dominance of banking does not mean that there is no space for disruption. Smaller banks and fintech payment providers are shaking the payment landscape, starting by serving the unmet needs from small-to-medium enterprises (SMEs). Smaller banks compete with richer solutions and better customer experiences, while mega state-owned banks are still arrogant and look down on SMEs. eCommerce-giant-backed fintechs like Alipay and Suning Pay are also leveraging massive amounts of consumer and merchant data to develop innovative and personalized payment solutions for SMEs.
- Three main digital B2B payment methods serve different customers’ needs. The primary B2B payment method in China is online bank transfers, which meet most B2B customers’ needs. Electronic bill payment can satisfy B2B sellers with account-receivable financing needs. Non-bank payments will fill the financial gap for unbanked and underbanked microbusiness customers.
After understanding the unique B2B payment landscape in China, B2B digital strategy pros should then adopt a customer-centric approach to developing their payment strategy. Forrester recommends that digital and sales leaders precisely define their customer segments and create detailed customer journey maps to understand their expectations for payments. They then should partner with the right vendors to serve these needs and expectations.
You can find more insights and recommendations in my recently published report: “Define Your Payment Strategy For B2B eCommerce In China.” And if you’d like to discuss your current B2B payment pain points and challenges, feel free to reach out.