On Developing China's Third Party Payment

The development of the third party payment, which enhances electronic commerce’s development greatly, provides a secure, efficient, convenient and low-cost way to transfer funds between the seller and the buyer. With fast development of electronic commerce and fierce competition in the third party payment market, the central bank of China sets about granting profession licenses to related companies. This paper theoretically analyses the third party payment’s development situation, operation mode and operation feature, and then offers strategies to develop China’s third party payment. As a separate operating agency, the third party payment platform, acting as intermediation in the process of dealing under the supervision of banks and business management departments, provides secure guarantee and technological support to the two trading parties. The platform, also acting as witness and channel of the network transaction, offers abundant payment means and reliable service to customers decreases the possibility of fraudulent trade and relieves public worries on the security of network transaction. The platform of third party payment was investment hotspot of the year 2005, which is called "on-line payment year". Due to relaxed qualification cognizance, small payment companies sprang up and the scale of platform increased by 100 percent a year. According to IReserach’s investigation, the third party payment in 2004 is 2.3 billion RMB, while the number was more than 30 billion RMB in 2006 and with an expectation of 280 billion RMB in 2010. It is said that the People’s Bank of China sets about granting license to the third party payment companies which means 80 percent small ones will be eliminated, thus perfecting operation mode becomes the most important issue for this industry. 580 Yong Jin, Wei Song, Jingyi Zhang 1. Development situation of China third party payment The 21st century is an era of information with thorough development of computer and network technology, and EC stride ahead in this era. Meanwhile multitudinous information technology enterprises, venture investment companies, and production circulation enterprises involve in the field of EC. Realized high growth of 73.7% in 2004, the EC market paced into its steady growth stage since 2005, with a transaction sum 680 billion (increased by 41.7%) and 1020 billion in 2006(increased by 50%). Fig. 1. Recent Development Tendency of China EC Nowadays, two methods are widely used in the EC payment, one is electronic bank service and the other is the third party electronic payment service. According to the report of Ireserach, in China, 97% electronic payment is on-line payment, while only 3 percent is paid in form of mobile or telephone payment. All these prove that, in spite of the existence of immaturity and relaxed cooperation in this industrial chain, great achievement has been gained and on-line payment has been playing the most important role in the field of electronic payment. As to present case, on-line banks mainly deal with payments among enterprise (B2B), especially large and medium sized enterprises, whose sums of transacted money are large and their business partners are relatively stable, thus their interior ERP systems or self-constructed platforms are able to deal with the payments. As for the domain of small–sum payments, such as B2C and C2C, services provided by single on-line bank could not satisfy the changing and flexible demands of smallsized customers. Similarly advanced technologies and costly maintenance expenses are beyond small-scaled network and business’s management. Under such situation, the third party payment platform, a non-bank investment institution that is independent from both the payer and the payee, becomes a hot spot in the market of on-line payment. From 2001 to 2004, its annual compound growth rate is by 44.2 percent. By 2004, China’s third party payment increased to 2.3 million RMB. On Developing China’s Third Party Payment 581 2. The Third Party’s Payment Modes The third party’s payment mode can roughly divided into two kinds: One acts as bank gateway proxy which provides many bank connections to the users; the other acts as transaction intermediary (whose main function is to bridge the buyer and the sell, and also connect the EC platform and the bank) to realize on-line fund transaction. 2.1 The Mode of Payment Gateway From the whole process, the payment gateway mode can be regarded as a channel which links multi-banks and treaty-signed merchants, the buyer pays the seller indirectly through the third party payment platform and the third party provides compatible connection platform to the sellers. Fig. 2. Illustration of Payment Gateway Mode Fig. 3. Illustration of Credit Intermediary Mode 2. 2 The Mode of Credit Intermediary In order to increase two sides’ credit, ensure well circulation to fund and cargo, the third party payment service, acting as the credit intermediary, arises at the historic moment, implements "receiving and paying on other's behalf " and "the credit Buyer