Online & Mobile Payment Systems


This dissertation explores the potential of online and mobile payment systems to become the primary payment means in electronic commerce (e-commerce). For a long time, the populace in China has relied upon cash as a form of payment for purchases made. This is in addition to a particular segment of the population that has come to rely on debit cards. This dissertation, therefore, wishes to illustrate how online payment services, along with mobile payment systems, have gained popularity in China and are in effect poised to become the leading means of payment, replacing the use of cash, debit, and credit cards.

Online and mobile payment systems as a means of e-commerce payment are explored to a great extent, both from China’s perspective and from a global point of view. In addition, the commencement and emergence of e-payment in China as an alternative payment system to cash has also been evaluated, along with the drastic growth in the digital content market. Furthermore, the definition of mobile payment and several mobile payment types have been examined, followed by an assessment of mobile payment applications in China. Finally, the current and future trends in both mobile and online payment systems have also been assessed. Ultimately, this research paper has dwelt on the obstacles facing online/mobile payment services in China and on a global scale.


In conjunction with the fastidious progress witnessed by the mobile and internet network, several e-commerce activities have come about, resulting in alternatives and convenience to the lives of individuals. Wang and colleagues (2004) contend that mobile payment, along with online payment, as an inducement to additional e-commerce development is poised to turn into the prime means of payment with time. Based on the business model, the categorization of online payment entails agency payment, pre-payment, online platform payment, and online banking payment.

Operators of an online payment platform assume online payment platforms to function as a connector to service providers, the users, and banks. In this case, Yan (2005) thinks that an online payment platform is usually assumed by an economic establishment independent of both the service provider and the bank. Analysts have predicted a bright future in e-commerce (for example, Trappey & Trappey 2001; Wang et al. 2004; Jiao & Baijia 2005), thanks to the increased use of online mobile payment methods. In addition, finances have taken center stage for a multitude of mobile content usages, such as transferable vouchers, mobile ticketing, content purchase, loyalty cards, and payment methods (Yan 2005).

Moreover, such form of mobile payment as contactless payment provides convenience and speed, with the prediction that these shall constitute 10 percent of the entire mobile payment market come 2010 (He-suk 2009). On the other hand, there has been a lot of anticipation regarding online and mobile payment methods applications, partly because the mobile payment market is still in its infancy stage.

We also have the issue of standard maintenance for the concerned service providers. In addition, business and technological issues have played a part in the creation of uncertainty, resulting in complex management by financial institutions and mobile network operators alike. In China, the country’s domestic online payment has principally been dominated by the system of debit cards (He-suk 2009). For this reason, both the service providers and the users can control the risks associated with online payment effectively.

Nevertheless, at the moment, the profits that the domestic payment service can realize are also correspondingly low. These days, there is an emerging sense of industrialization concerning the application of mobile payment as mobile phones continue to gradually substitute both credit cash and cash at the point of sale. Presently, there has been an increase in China concerning both the handset users and the circulation of bank cards, at 0.42 and 0.96 billion, in that order. This has acted to provide limitless commercial prospects as far as China’s mobile payment industry development is concerned (He-suk 2009).

The increased reliance on applicable charges and mobile content on short messaging services (SMS) has ensured the gradual acceptance of the mobile application as a form of payment (China Daily 2005). On the other hand, a comprehensive mobile payment application requires engagement to a higher level.

Literature review

Online & Mobile Payment Systems as means of e-commerce payment

The wave of e-commerce in China has gone a notch higher at this time and age when the vendors and consumers are faced with hard economic times. As a cost-saving measure, everyone is now turning to the internet for cheaper solutions. Nevertheless, the chief beneficiary of the consequent migration to the information technology age is, without a doubt, the providers of online payments (China Daily 2005). This has especially been the case, given that these service providers are providing the consumers with new alternative payment methods in a country characterized by a rarity in credit cards.

A case in point here would be 99Bill Crop, a payment provider in China. This corporation has witnessed soaring growth as far as internet shopping is concerned. Further, the development of the corporations has also been attributed to the change of attitude of the users, coupled with the corporation’s success when it comes to the provision of novel payment alternatives. As a result, 99Bill enjoys some 33 million users registered with them, making it a leading payment provider in China (Bhatti 2009).

The use of prepaid cards by payment providers in China has mainly been important. Easyown ranks as the prepaid method that is most popular and which is offered by 99Bill. This system is more of a phone charge card for use by prepaid users of mobile phones. In this case, it is not necessary to have users own a bank account to facilitate a transaction. China Mobile offers the prepaid card charged to a mobile phone. This mobile service provider, touted as the leading mobile carrier globally (Bhatti 2009), is believed to have subscribed to 470 million users by February 2009.

Given that China Mobile has traversed every corner of China (He-suk 2009), this means that the payment methods that it provides to its users jointly with 99Bill Corp have become even more convenient for the users. As a result, mobile payments are poised to turn into a convenient and fast mode of services and products in the years to come. However, in the wake of 2009, just a tiny fraction of the more than 600 million users of mobile phones in China were seen to utilize m-payment services.

Even then, a lot of optimism surrounds the venture by private and capital funds investors in China as regards mobile payments in the future. This is mainly because, at the moment, China boasts as the leading country in the world with the most extensive user base for mobile phones (Bhatti 2009). In addition, the e-payment in the country is also, at the moment, underdeveloped. Furthermore, in 2008, telecommunication operations within China underwent a restructuring process, thereby creating a novel and competitive environment (Business Wire 2009). As such, it is the hope of the individual operators within this industry in China to have the edge over their rivals, via the utilization of mobile payment, in addition to extra value-added services.

In 2009, 3G licenses were issued, further paving the way for rolling out by mobile service providers of a multitude of novel m-payment services and e-commerce. In line with such a perceived increase in the mobile payment market, SmartPay, a leading business entity in mobile payments located in Shanghai, China, has sought to enhance its capital amount (Business Wire 2009). In addition, RRE Ventures, a private equity organization from the United States which has operations in China, has heavily invested millions of its dollars into SmartPay. The injection in the capital, courtesy of the United States firm, enhances a recruitment drive for more employees, facilitates the organization’s geographical expansion, and enables the company to make strategic acquisitions.

SmartPay acts as a connecting point between non the one hand, a user’s bank account and, on the other hand, their mobile phones (China Daily 2005), thereby allowing them to make payments for such services and products as electricity and gas bills, cars, and even phones. E-commerce development in China has significantly been hampered by charges, seeing that previously, only a handful of the Chinese made use of cheques or credit cards. Projections by CINIC (Chinese Internet Network Information Centre) indicate that close to three-quarters of the citizens in china made below five online shopping sessions for the first half of 2005.

In addition, over 50 percent of those who did online shopping made their payments via conventional means such as payment after delivery or remittance through postal services. In this case, just about 0.3 percent of the entire transactions involved mobile payments (China Daily 2005). Short messaging services (SMS) via the use of phones are gaining popularity by the day, resulting in a corresponding increase in mobile payment applications. In the same breath, consumers shall continue accepting mobile payments in large numbers. This is as per a June 2005 report released by Play Research, a domestic consulting firm.

By 2007, the number of Chinese subscribed as mobile phone users stood at over 500 million. In addition, there was also a rise in the them-payment market for the period between 2002 and 2004, a time when this service enjoyed steady growth. By 2005, China had well over 15.6 million users of the M-payment services. This represented a 134 percent rise, relative to the 2004 statistics, further comprising a 4 percent increase in the country’s overall subscriber base for cellphones.

According to a forecast by Norson Telecom Consulting, a domestic analyst within China, the user base for M-payment was poised to witness rapid growth from the year 2004, moving on to 2008, a time when the user base had been pegged to stand at 139 million, thereby constituting almost one quarter (24 percent) on the entire users of cellphones in China. Additionally, the M-payment industry was estimated to have, at the time, a value equivalent to 3.28 billion yuan.

E-payments in China

The commencement of e-payment in China can be traced back to 1998 when China Merchant Bank rolled out its online banking services (Das, Saxena & Gulati 2005).

Following this bold initiative, the bank then provided mobile banking, online payment, and the transaction of banking services online. At first, the e-payment service had been dominated by banks. In addition, the banks, together with the well-established large corporations, sought to embrace the premier payment model as the interface for payments. In a way, e-payment could be said to have been the preserve of large enterprises.

Even then, the SMEs (small and medium-sized enterprises) also needed diversification and growth. For this reason, e-payment embraced a payment platform for a third party, in effect acting as a link between, on the one hand, the banks and, on the other hand, the business entities. Thanks to the ensuing payment platform boom for third parties, the e-payment industry underwent a massive improvement exercise (Dahlberg, Mallat, Ondrus & Zmijewska 2006).

The emergence of e-commerce was characterized by a slow uptake (Chou, Lee & Chung 2006), and more so in the B2C (business-to-consumer) sector (Chen & Adams 2005), whereby the high level of optimism about the projections for growth within this sector, realized a downward trend, mush to the dismay of the industry players. Due to these developments, there was a resultant shift in focus on the possible e-commerce obstacles. One of the significant obstacles to e-commerce, which was time and again cited by numerous surveys that were carried out, is the vital concern of the consumers regarding the issue of online payments.

At this moment in time, thanks mainly to the experience that the industry players have gained, we can at least report enhanced confidence levels on the part of the consumers (Dahlberg et al. 2006); as far as online payments are concerned. Furthermore, it is also important to note that as e-commerce continues to realize a gain in terms of maturity, the vendors of online payment services have commendably embarked on a mission to ensure that the products they provide to their consumers best suit the sales channel of online payment.

According to a report by OECD (2004a), there has been a drastic growth in the content and services digitally available over the internet as the years go by. However, even then, if at all such observed positive trends within this sector are to eventually result in a market share growth that has for a long time now been expected by the industry players, solutions for online payment must be thoroughly developed be put in place. Furthermore, such solutions also require adjusting to fulfill the demand for payment transactions characterized by e-commerce.

A quick summary of online payment systems shall serve to reveal a multitude of techniques that entail electronic currency, credit cards, online banking, and mobile systems (Dahlberg et al. 2006). On the other hand, when we may want to examine the actual usage, there is a resultant decline in terms of the platform of payments that may be said to be feasible, and more so about the international transactions. In this case, credit cards dominate, meaning that only a few of the novel alternative forms of electronic payment methods have managed to succeed thus far.

At this point, we ought to be asking if the market for online payment is, at the moment, ready to fulfill the requirements for e-commerce. Above all, this may call for a capability to make room for secure payments that are recognized in the international market, undertake transfers from one person to the other, and conduct a multitude of expenses, such as micro-payments. In 2006, China witnessed massive growth within the e-payment industry (Business Wire 2009). In addition, the mobile phone emergence, coupled with telephone and online payment, acted to hasten the sector’s development.

On the other hand, security hazards, policy risks, and credit deficiency still exist. Internet payments in China were seen to move a notch higher in 2005, following the entry into the Chinese market by the eBay system of e-payment. Furthermore, in the August of the following year (2006), Yahoo Inc. acquired a 40 percent stake in Alibaba, a company that had not ventured into the market for internet payment in China. These developments increased the competition within the online payment sector, and by the end of 2008, China boasted over 40 portals for internet payment. This is as per a report prepared and released by Euromonitor, a firm that deals with market research.

An annual report released by FriedINet and partners sought to illustrate the development that had taken place in the e-payment industry in China in the 2006-2007 financial year. This report benefits the investors, vendors, and the entire industry chain. It helps shed light on several fronts, especially as far as accurate identification of opportunities and the industry’s lifecycle are concerned. Furthermore, by way of probing the prevailing situation, this report gives a picture of the changes and developments that took place within the industry in 2006, from the point of view of industry chain structure, development environment, industry chain competition, and the layout of the sector, to discern the developmental trend within this industry.

Further, this report presents a brief assessment of the leading brands and their competitive performance in the said year (2006), and this somewhat summarizes the failures and successes of these enterprises, with due regard to their market share, the situation of prevailing competition, and the associated strategy for beating the competition. Besides, the report has also sought to explore the growth potential for the e-payment industry by analyzing the revenues and profit status of the various connections that cut across the chain in the industry.

A lot more companies have since ventured into the online payment market, and according to some 2005 statistics, it is estimated that the industry value of transactions stood at 34.7 billion yuan (Dahlberg et al. 2006). Moreover, it has been projected that the consumer base for the online activity shall witness an average of 43 percent growth for three years from 2006 moving forward. In 2006, more than 35 million consumers were projected to have utilized online services while making purchases, and this acted to bring the value of the transaction for the industry to a high of 107.2 billion at the close of 2007, up from 64.9 billion in 2005 (Business Wire 2009).

Young consumers have especially been noted to utilize credit cards when they are making payments, with the result that these have seen turned into the form of online payment that is now most preferred, at least in China. It is, however, forecasted that with time, prepaid cards may very well prove to be a potential tool of payment shortly (Das, Saxena & Gulati 2005), although the expectations are that there will still be limited demand for these, albeit for a short time, seeing that at the moment, there lacks a sufficient development of secure protocols for these.

Card issuers and banks alike have since resigned to the acceptance that the internet, at this point, stands as a leading and the most promising novel channel of payment, according to the FriedINet annual report. This is even though the service is still underutilized in China but is also undergoing a lot of development. For example, in 2006, payments via the internet accounted for a partly 4 percent of the total spending through financial cards 2006 (Mallat 2006).

The projection, however, is that by 2011, internet payment shall have realized a two-fold increase in terms of growth, to stand at 8 percent. This is as per the projection statistics of Euromonitor. The report further offered that following the venturing into the sector of online payment by such operations as PayPal that are pretty well established, this is bound to result in a dramatic heating up of the online payment systems. Without a doubt, the utilization of internet payments services could be aid is still in its infancy stages, at least for a majority of the developing countries. Nonetheless, secure, improved, and mature electronic banking systems are poised to boost China’s online payment industry significantly. As a result, by 2011, the sector shall have attained a value equivalent to 200 billion yuan. (Euromonitor 2008).

It is also now possible for passengers to purchase their air tickets online, thanks to a strategic alliance that has been entered by AliPay, a subsidiary online payment provider of Alibaba, a giant e-commerce solutions provider in China, and China United Airlines. According to this arrangement, AliPay and CUA shall work jointly to provide e-ticket services to the business-to-business (B2B) and the business-to-consumer (B2C) businesses. What this means is that the users of AliPay shall gain access to the website of CUA by way of logging in, using the accounts that they have opened with AliPay, thereby enabling them to settle their bills by way of online banking services, AliPay, or using their credit cards (China Tech News 2009).

Furthermore, Shenzhen Airlines and Hainan Airlines have also entered into similar deals with AliPay, like CUA. As a result of such cooperation, airlines will be able to cut their sales costs and, at the same time, enhance the convenience of the provision of ticketing services (China Tech News 2009). Moreover, with its 180 million users, Alipay translates into a potential market for the various airlines in China.

Mobile payments

Mobile payment is a novel and fast-adopting optional payment method (Maverick China Research 2008, p. 71). This new payment method has especially become well established in Europe and Asia. As opposed to making payments through the use of cash, credit card, or check, a consumer, in this case, has the alternative of making use of their mobile phone for purposes of making payments to a multitude of complex and digital goods, as well as services. Some of these include videos, music, ringtones, subscription to online items and games, digital goods, and wallpapers (Maverick China Research 2008).

Furthermore, it is also quite possible to make payments for transportation fares, such as subway, bus, or train, and parking meter payments. Moreover, magazines, books, tickets, and many hard goods can also be paid for via mobile payment. The mobile payment system is made up of four principal models: Direct Mobile Billing, transactional costs that are based on premium short messaging services (SMS), Contactless ‘near field communication (NFC), and WAP (mobile web payment). In a majority of the areas in Asia and Europe, mobile payment has gained a considerable foothold, resulting in a commendable adoption level (China Economic Review 2007).

The cumulative market for the four forms of payment via mobile services is poised to exceed $ 600 billion by 2013 (Maverick China Research 2008, p. 71) on a global scale. Mobile charges may as well refer to several payment systems. First, it is possible to utilize a mobile device for making direct payments, like in the case of those transactions involving telephone bill charges. In addition, the mobile phone could also be used as a payment device (Mallat, Rossi & Tuunainen 2004), for example, through a user’s bank account. The Paybox system, an operation with its roots in Austria, is an excellent example of the latter.

This mechanism is designed to enable the utilization of a mobile phone as a secure device to allow a user to make payments. In this case, a client is required to enter their registered mobile number and the amount they would wish to pay. In addition, the client shall have been issued with a Paybox personal identification number (PIN) which they are required to enter to confirm the payment transaction (OECD 2004d). The amount that a customer enters through their mobile phone shall then be debited from their bank account.

There are several significant potential benefits of mobile payments, one of which is their ability to afford enhanced applicability to the users compared with other forms of revenue owing to their being readily available, coupled with high usage rates. It is, therefore, quite possible to develop mobile devices to act as the means of payment for, say, bus tickets. In addition, mobile payment acceptance could as well prove quite attractive to merchants given their wide spreadability. As per the observations by OECD (2004c), wireless access has thus far exhibited a commendable level of growth concerning the telecommunication infrastructure.

Research findings by Maverick China Research, a telecom consultancy based in Beijing, contend that three-quarters (75 percent) of all the users of mobile phones in China are yet to have any form of access to anyone given mobile payment service. Moreover, out of the 25 percent of the users that have access to mobile payment services, just a dismal 2 percent have sought to utilize it to conduct transactions. YeePay, China M-World, SmartPay, Guanghou Huanxin, and NationM, are several of the finest upstarts for mobile payment services provision (Jiao & Baijia 2005) in a market that is still fragmented, where the more significant majority are still stuck on the use of cash, as opposed to the new and emerging forms of money transfer, such as online and mobile payments.

According to projections by Maverick China, the use of mobile payments is poised to reap frog to 45 million in 2010, up from 17 million in 2007. On the other hand, Maverick China has estimated that in 2010, the revenues collected by mobile payment providers shall have hit the US $ 92.8 million mark come the year 2010, from the US $ 24.9 in 2007. Such an augmented growth is mainly expected to come about as a result of faster networks which will create room for more sophisticated applications, thereby paving the way for mobile commerce.

The younger generation has significantly been predicted as a significant portion of the market segment for mobile payment (Maverick China Research 2008), going by the current demand for digital content (for example, games and ring tones) by this age group. Furthermore, given the fact that this age group is also less likely to be the proud owners of credit cards, the use of mobile phone bills for purposes of payment or, better still, the use of phone cards could perhaps be the only option left for the youth to make purchases of digital or physical goods and services.

Moreover, there is also the possibility of having the mobile phone designed to enable a wide range of mobile phone types to allow for such payments. Mobile phones have been seen to play a significant role when it comes to the issue of providing and downloading mobile content (Maverick China Research 2008). This is one area that the user and the payment services vendor should look at, capable of bringing along an initial string impact. Mobile phone usage in this day and age of digital content, like ring tones and downloadable games, is made of premium SMS (OECD 2004d).

On the other hand, currently, not many consumers are utilizing their mobile phones as a payment tool. For example, a survey conducted in Finland showed that below 7 percent of all the mobile phone users that took part in the research placed orders or made purchases using their mobile phones in 2003 (Statistics Finland, Survey Results of Autumn 2003). In the same year, Paybox ceased operating in the United Kingdom, Germany, and Sweden, chiefly due to prevailing limitations regarding mobile payments realization. Moreover, mobile payments development allows those international payments that could as well be utilized to make micro-payments calls for specific steps to allow for interoperability.

Premium’ SMS- based ‘mobile payments

This is a system in which a consumer must rely on a request for payment of goods or services by sending a short messaging services text to a given shortcode. In effect, a premium charge gets attached to the consumer’s phone bill following the SMS request. The merchant, from whim a consumer has made the purchase, then receives a notification that the payment process has been successful, and this acts as an impetus for the merchant to now release the goods that a customer has paid for (Kreyer, Pousttchi & Turowski 2003). Often, the types of goods involved in this mobile payment system tend to be digital, given the lack of allowing for a delivery address that may be trusted.

As such, the merchants are expected to reply to the payment of goods notification through Multimedia Messaging Service to ensure that purchased goods, such as ringtones, music, or even wallpapers, are delivered. It is also quite possible to pay, say, barcodes via the use of Multimedia Messaging Service, after which the barcodes have to be scanned by a merchant so that they may confirm that indeed, payment has been made. In both Europe and Asia, the popularity of transactional charges has been immense (Ondrus & Pigneur 2004). However, these now appear to have surpassed additional mobile payment methods, like Direct Mobile Billing and WAP, due to several reasons.

First, this payment model has been characterized by poor reliability because the payment process can fail quickly (Kreyer, Pousttchi & Turowski 2003) following a loss of a message. Slow speed is another issue, seeing that an announcement could take hours to get to a merchant. In this case, consumers have no intention of waiting for the arrival of a message that is taking ages to get delivered. Furthermore, this mode of payment is characterized by high costs. For example, shortcodes set-up cost, Multimedia Messaging service payment, and the ensuing prices for customer support compensating for delayed or lost messages.

In addition, the supporting and running cost for the systems are high, with the result that the payout rates goes to an all-time low, sometimes to the level of 30 percent. After-sales follow-up also becomes quite complex, and this is at low levels when it happens. Following a successful recipient by a merchant of a payment message, followed by the customer receiving goods, there is nothing much that a consumer may accomplish. It becomes rather difficult for them to recall the exact location at which they made a purchase or even the protocol of having to make a repeat purchase. Moreover, telling one’s friends about this mobile payment system is also rather complex (Kleijnen, Wetzels & de Ruyter 2004).

Direct Mobile Billing

In this case, the consumer has a choice of applying the option of mobile billing while making payment at a time when they are departing from such an e-commerce site as online gaming, following what is known as ‘two-factor authentication (Maverick China Research 2008) that entails one-time password and personal identification number (PIN), the mobile account of a consumer gets charged for any purchases that they could have made. The benefit of using this form of payment is that either a debit or a credit card, or even a solution for online income that requires a user to pre-register, such as PayPal, is avoided. For this reason, a user gets to bypass companies dealing with credit cards and banks.

This mobile payment method, which has especially gained prominence in the Asian region, has several additional benefits. To start with, the system ensures the security of the users through two-factor verification (Kreyer et al., 2003). In addition, the system is also equipped with a risk management engine, and for this reason, fraud incidences are dramatically reduced. Finally, there is also the issue of convenience, seeing that there is no requirement for novel software or a pre-registration.

The mobile billing system is also easy to operate, and the user may view it as just another alternative while exiting a purchase transaction process. The fastness of the methods is also a benefit, and in less than 10 seconds, a majority of the transactions will generally have been accomplished. The system has also been quite authentic (China Economic Review 2007). Up to now, 70 percent of the entire digital content purchased via online means, at least in certain areas within Asia, has involved the applications of direct mobile billing.

Contactless NFC

This form of mobile payment is mainly applicable when a consumer is paying for purchases of transportation services (Ondrus & Pigneur 2004) or at a physical store. In this case, the mobile that a user has been equipped with unique features, such as a smart card. As a result, most transaction often needs no verification, although those demand PIN verification before a given transaction may be completed. The payment that a consumer is supposed to make may be either charged directly to their bank or mobile account or have their pre-paid funds deducted.

The challenges that mobile payment systems that rely on NFC face largely stem from a fast and wised adoption of the technique (Ondrus & Pigneur 2004). Nevertheless, we have several banks and phone manufacturers optimistic about potential business opportunities in the years to come. Another challenge is insufficient supporting infrastructure, alongside complex stakeholder standards and ecosystem. Vendors of the NFC system in Japan appear to be extensively associated with mass-transit networks, such as Mobile Suica, which JR East often applies, a Japanese rail network. The system of Osaifu-Keitai, often utilized by such companies in Japan as Edy, Mobile Suica, and Monaco, has in effect turned into a standard mobile payment method, at least in Japan.

Several other NFC vendors mainly located within Europe employ contactless payment by utilizing cellphones (Chou et al. 2006) to settle off and on-street parking within areas that have explicitly been demarcated. Parking enforcement by the parking warden usually uses transponder tags, license plates, or even barcode stickers. The conceptualization of contactless NFC happened for the first time during the 1990s. Since then, the technology has been commercialized. The benefits to the consumers that are utilizing this include using their mobile phones to pay for the parking fee of their vehicles without having to disembark from their cars.

Moreover, there is a reduced need on the part of parking operators to invest either in a novel or existing parking infrastructure. Payments that are NFC-enabled are more manageable to handle, but they also tend to be less costly (Chou et al. 2006) in the long run, compared with handling of cash and additional conventional methods of payment. As an extra benefit, users can completely track all the sufficient payments they may have made via an NFC-enable system, as opposed to the case with cash payments.

WAP (mobile web payment)

WAP is a payment system in which consumers utilize displayed web pages on their mobile phones or those applications that they have managed to download on their cellphones to settle payments for purchases. In this case, the underlining technology employed by a consumer’s mobile phone is a wireless application protocol (WAP). As such, this mode of mobile payment gets to inherit the real benefits and limitations that usually accompany WAP (Chen & Adams 2005).

On the other hand, several benefits have been proved to accompany the utilization by a consumer of a model of web payment that one is familiar with. To start with, sales follow-on becomes easier. The mobile-enabled web payment lets a consumer go back to a specific site that they had previously purchased from or even to other types of goods that they could be impressed with (Chen & Adams 2005). In addition, the web pages that a consumer can access via the use of their mobile phones usually have a URL link.

Furthermore, it is quite possible to bookmark these, and for this reason, a user may in the future find it relatively easier to either share such a site with their friends or even re-visit them. Moreover, a fast and predictable system of payment that is a characteristic of WAP has seen the payment model attain high customer satisfaction (Kreyer et al. 2003). Then we have the issue of the ease with which an operator may use WAP by using online sites of payment pages that are pretty familiar. Nonetheless, for direct charging of a mobile account via an operator in the mobile network, pre-registration, or debit/credit card, solutions of online payment such as PayPal will continue to be a requirement, like in the case with the desktop environment.

Application of mobile payment in China

According to Owen Fletcher, a correspondent with IDG news, service providers of mobile phone payment size the opportunity of the next-generation mobile phones launch to expand their market, even as obstacles within this sector still imply a take-off for the providers is not yet guaranteed. A majority of the online payment providers within China have already embarked on a campaign to provide mobile payment services to offer competition to increase the number of providers for mobile-only payment services.

Nonetheless, Fletcher (2009) contends that even as the potential for mobile payments services in China may, at best, be viewed as a giant, with a mobile subscriber base than is well over 640 million, at the moment, however, this sector has been confronted with plaid accessibility of similar phones and pay platforms to augment these. In addition, providers are required to arrive at separate accords with merchants, banks, and mobile carriers within the individual and segmented Chinese provinces to launch their mobile payment systems.

As Boaz Rottenberg, a marketing research analyst with Maverick China Research, whose headquarters are in Beijing, the menacing undertaking has constrained growth. According to Rosenberg, “People have been talking about mobile payment for quite some time now, but it still hasn’t taken off” (Fletcher 2009).

Rottenberg further notes, “Market conditions are just not right.” (Fletcher 2009). In the face of such a menacing threat, however, there are other providers who have dared to venture into the market. One such provider is UMPay (Union Mobile Pay), the leading mobile payment provider in China. UMPay came into being following a joint-venture between, on the one hand.

The leading global mobile carrier and, on the other hand, China UnionPay, which is an organization that handles credit card transactions within banks. According to a press release by UMPay, its excellent mobile payment service has managed to register well over 40 million users since its launching in 2004. Moreover, several of the accounts that the company has managed to write are presumed to be still active. Nonetheless, UMPay hopes that the much anticipated 3G mobile services launch sometime this year will bring about novel growth opportunities, according to an insider at UMPay, a staff member.

The company provides standard mobile payment options, which entails text message initiation and via a downloaded client who first has to utilize a wireless application protocol (WAP) to link with the payment system provider. Other Chinese employees use mobile payment to top up pre-paid balances on their phones by directly relaying the ensuing charge to their mobile accounts. The benefit of this system is that one is saved from having to purchase a physical card to charge their account (China Market Information Centre 2006). Furthermore, this system enables users to buy such digital items as music or online game accounts. In addition, it is also quite possible for the users to purchase from offline vendors and physical goods. In this case, such offline vendors are usually partnered with a provider for the payment service in use.

Another leading online payments provider in China is 99Bil, and since 2006, this company has been providing its users with a WAP-enabled mobile payment alternative. In as much as these forms of services are projected to witness unprecedented growth in the years to come. Nevertheless, 99Bill contends that the most significant opportunity is to be found in the task of providing mobile as only one among a multitude of other payment options. This is as per the company’s Chief executive officer (CEO), Oliver Kwan. Kwan has further opined that shortly mobile payments shall cease to be just another stand-alone product, adding that “That’s not what the consumer wants” (Fletcher 2009).

Current and future trends of online/mobile payment systems

A more significant portion of the growth that has recently been witnessed in the e-commerce market in China has its roots in the widely expanding online payment systems (Maverick China Research 2008). At the moment, we have pretty several domestic payment providers giving innovative means for prevailing over those barriers that, in the past, have acted to avert the growth in e-commerce. At the moment, online payment alternatives based on cash and payment solutions based on multi-channel seek to augment the swift increase in the issuance of debit and credit cards within China. As a result, some of the country’s third-party payment providers, like 99Bill and Alipay, are experiencing an upsurge in new subscribers signing up with them.

China launched its very first payment services using the mobile phone in 2002. This was more of a collaborative effort by three players. First, there were the commercial banks, and then we had the mobile communication operator. Finally, a service provider for bank card authentications was also involved in this maiden venture. In the space of 5 years, some of the mobile payment services that have managed to penetrate the Chinese market include micro-payments, mobile phone payment, and account management of personal banks (Maverick China Research 2008).

Even as there was an enhanced awareness of the services above and in the face of alteration in terms of attitude and behavior of various consumer groups in China, the level of uptake of this novel alternative form of payment by the customers remains somewhat sluggish. Nevertheless, the value chain of mobile payment systems in China was already assuming its shape by 2007 (Maverick China Research 2008). This value chain was made up of the platform providers for mobile payments, financial institutions operators of mobile phones, and the authentication agencies.

At the moment, the markets for mobile payment services appear to be undergoing a transition from numerous solutions that have been historically tried by the service providers and failed to a future that seeks to give promise to the industry (Maverick China Research 2008). Still, there are many uncertainties surrounding this transition, even as we have a lot of potential in the form of novel technology innovations. The distribution channels may be said to have played a significant role as far as the market for online and mobile payment services is concerned.

For the last couple of years, there has been a rise in the chains of mobile phone payment service providers. Moreover, the operators of telecommunication have also been seen to have played a far more active role regarding the distribution channels (Mallat 2006). In developing countries, a majority of the individuals are without access to conventional bank accounts and several other financial services. However, a good number of people at least own a mobile phone. This is how, then, the service providers of online and mobile payment services seek to leverage the mobile phone to enable individuals to pay their bills, gain access to bank accounts, pay loans, and borrow money.

Carol Reilini, the chief executive officer (CEO) of Obopay, a payment systems visa a mobile phone that was early this years launched by Nokia, believes that the market for this service in the developing countries is exploding. Realini thinks that mobile phone-based technology shall have an impact on financial services. She asserts that this technology “will allow transactions in checks and cash to be done electronically,” Realini further contends, “That is the source of the opportunity that is unfolding around the world.” (He-suk 2009).

Obopay has its headquarters in Redwood City, California. At the moment, the company has operations in the United States and India. The service enables mobile phone users to transfer money amongst themselves between their accounts via the applications of a text message or software installed on their mobile phones. In this case, the users may as well utilize the Web to accomplish their goals (He-suk 2009). A user gets charged just 25 cents when sending money that does not exceed $ 1,000 within the United States. On the other hand, banking services fees for the company’s operations in India get paid up by banks. It is important to note here that the Indian banks have willingly sought to bear these charges since the service enables them to access new bank account holders without establishing physical retail branches.

Obstacles to online/mobile payment systems in China

The importance of online payment in e-commerce cannot be overemphasized. Nevertheless, in e-commerce, a merchant may only transfer the right to ownership of goods purchased at a time when the transaction for payment has been completed. Ecommerce is characterized by quickness and convenience (Jiao & Baijia 2005) compared with a face-to-face purchase. It has already been stressed that internet purchases are based on a credit card transaction, contrary to the consuming Chinese culture that is more cash-oriented.

According to a 2006 survey that sought to explore the various payment methods for online purchases, about three-quarters of the respondents (73.8 percent) indicated that they would wish to use debit or credit cards for settling online purchases (China Maverick Research 2008). On the other hand, 28.1 percent of the respondents said they would opt for cash and carry purchasing methods, and 15.2 percent preferred bank money transfers. The remainder (2 percent) opted for additional purchase methods.

The principal obstacles that the respondents to this research study gave as regards the issue of online payment included trim, or no transaction security (61.5 percent), a lack of guarantee for products already purchased, in addition of lacking after-sales service (45.7 percent), a payment system surrounded by inconveniences (21.7 percent). On the other hand, a less good delivery time was highlighted by 10.7 percent of the respondents, while a further 10.2 percent cited an unattractive process as an obstacle. Furthermore, 8.3 percent of the respondents cited unreliable information as another constraint to online/mobile payment services for e-commerce (Euromonitor 2008).

Even as analysts are optimistic about a high level of growth in e-commerce within China and, by extension, the globe, higher growth appears hindered because China does not have in place a credit card network that cuts across the nation. In addition, there is also the issue of the different manner of doing business by the various commercial banks that are found in China. This means that we have differences in the protocols these commercial banks adopt (Tan & Ouyang 2004).

A total of four key banks provide online payment options: Bank of China, China Merchants Bank, People’s Bank of China, and I & C BC (Industrial and Commercial Bank of China). Because commercial banks are crucial connecting elements as far as online/mobile payment services are concerned, there is a need to ensure that the technical standards they employ are somewhat similar to enable a nationwide carrying out of the desired benefits.

In China, however, these technological standards appear to differ from one bank to the other. As such, the banks cannot be able to establish cooperation amongst them. In addition, there is also the issue of reduced quality of online payment services (Trappey & Trappey 2001) that such banks provide within China. As such, payment systems may still act as a significant bottleneck as far as e-commerce development in China is concerned. For this reason, the government of China must take into account measures that, when implemented, shall lead to the effective development of the online/mobile payment system.


This dissertation sought to explore the potential of online and mobile payment systems to become the primary payment means of e-commerce. In this case, China has been taken as a case study to explore the development and implementation of online and mobile payment services. Further, the role that is played by third-party online and mobile payment providers such as 99Bill and Alipay have also been explored. This is in addition to the part of the banks and service providers alike towards ensuring that an alternative form of payment to cash is realized.

Since its implementation in 1998, e-payments in China have increased in leaps and bounds, buoyed by an increased number of young people who wish to make online purchases but lack debit or credit cards. Instead, use has been made of the mobile phone to facilitate the payment of such digital goods as ringtones. However, it is essential to note that mobile and online payments are characterized by convenience and fastness. These are parameters that the young and the upwardly mobile look for in a dynamic world. This, coupled with an increased number of mobile phone users in China, estimated to be above 640 million, has led to the rapid growth and expansion of mobile payment.

Banks, too, have played a role in the expansion, seeing that this is a chance for them to provide financial services to the populations that may otherwise not have embraced their services based on their geographical setting. Moreover, this is a cheaper means of attending to a customer without having to incur the cost of building a physical branch. Nevertheless, even as the future looks bright for mobile and online payment services in China and, by extension, the world, it is essential to note that several handicaps may face such an endeavor.

To start with, we have the issue of security. First, hackers may have access to the passwords of a potential client, thereby gaining access to the financial information of a potential customer. Secondly, online purchases lack a guarantee of quality and a lack of after-sales services. Therefore, the onus is, on the Chinese government and the government of other countries, to ensure that rules and regulations are implemented to safeguard the consumers, merchants, and the service providers for online and ‘or mobile payment services.

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