How Foreign Companies Can Process Online Payments in China

It can be difficult to process payments within China when you are a foreign company but it is not impossible to get an easy-to-use set-up.

The digital payment landscape in China is currently dominated by two companies – Alipay and WeChat Pay.

These are widely used across the country. There are also some international payment platforms that are in use in China and between them all they are making it easier for foreign companies to tap into the Chinese market, even if they do not have a base in China. However, it is important to be able to correctly navigate the regulatory environment.

Legal and Regulatory Requirements

The easiest way to set up operations in China is to establish a WFOE – a Wholly Foreign-Owned Enterprise. This is a legal entity that allows a company to obtain a business license in the country, have its own bank account and apply for the relevant permits, for example the ICP license, which they would need to host a commercial website. Companies that do not set up as an WFOE may find that access to payment services is restricted.

Companies that do not have a Chinese business entity may consider a cross-border payment solution. These are platforms that will allow foreign companies to complete financial transactions in China while the payment is then settled in their home country. This is not the same level of control that a local entity would give but can be a faster and cost-effective entry into the market.

Available Payment Options

Companies that have a local legal entity can connect their payment systems with Alipay or WeChat Pay. These services have robust APIs, can confirm payments instantly, and consumers trust them. However, the process for integration can sometimes be complex due to the regulatory requirements, all documentation is in Chinese, and there is ongoing monitoring for compliance.

Any company that doesn’t have an office in China will find that the cross-border options such as Stripe, Adyen, Payoneer and the international versions of Alipay and WeChat Pay are practical. Companies can offer local pricing at the checkout but the settlement can be in their own local currency. The platforms will take care of currency conversion and all local compliance regulations.

Setting Up

It is important to make sure that you select the right payment provider. Those who are building a long-term business in China will find greater flexibility if they set up a WFOE and work directly with the local platforms. On the other hand, anyone just testing the market or operating a smaller business may find that the cross-border platforms have more to offer. 

After selecting a payment partner, the company will need to provide several documents. These will include copies of business registration, ID verification for the company director, descriptions of products and services and banking data. Depending on the platform, it may also be necessary to provide availability of customer support in Chinese as well as a Chinese-language version of the website or e-commerce site.

Once documents are approved, the next step is the technical integration. Many of the providers will offer software development kits, known as SDKs, and APIs that are compatible with the major e-commerce platforms. Any company not working with a development team based in China might want to consider consulting local experts that are familiar with the infrastructure of e-commerce in China to ensure that there is a smooth transition.

Once the integration of systems is completed, the payment solution will need to undergo a brief phase of testing and review before you are able to make it live for customers. The timelines for this process will vary from provider to provider, but the funds will normally be transferred just a few days after the initial holding period. Some will send the funds in local currency to the Chinese bank account, while others will convert money and sent it to an international account.

Compliance and Best Practice

When conducting any business in China there is a requirement to ensure compliance with a variety of local laws, including those related to cybersecurity, ID verification rules and data regulations. Keeping up with changes to any of the laws or regulations is essential. 

In addition to this, consumers in China want and expect a localized checkout experience, so it is essential to optimize the payment flow to make it compatible with mobile devices and ensure that the key interface elements have been translated into Simplified Chinese. This will help to boost conversion rates. 

Using the tried and tested payment providers will also give you access to a range of built-in anti-fraud tools, monitoring systems and support with dispute resolution. You may find that the transaction fees are higher than they are in the Western markets – anywhere between 1.5% and 3.5% – the ability to reach into the huge consumer market that China offers will outweigh the cost.

In Conclusion Rewards Outweigh Complexity

Being able to process online payments in China is complex, not just because there are technical and regulatory differences, but because you also need to consider the cultural nuances and understand the behavior of consumers. However, any company that is willing to invest the time and resources to navigate the system will see that the reward is access to a digital and mobile-driven market that offers over 1 billion potential consumers. 

The increase in the number of global payment solutions, better and clearer regulatory frameworks and the increasing openness to foreign digital commerce mean that there has never been a better time to move into the Chinese market. It is important to remember that success will only come if you have the right payment systems in place and you fully understand how these systems function in the wider Chinese marketplace.