China third party payment market report Part 3 – online bank transfer

No. 3 Online Bank transfer(E-banking)

  1. 1. Brief Introduction

Considering the nature and purpose of this research, we put our focus on online bank transfer.

Bank transfer including online bank transfer(E-banking) and offline bank transfer. Bank transfer is the primary payment option in China, strictly speaking, offline bank transfer is the primary payment methods companies and individuals use in daily life.

In Practice, companies and organization normally don’t use online bank transfer due to security issue. But it is a trend that individuals like to use convenient online transfer for small amount money payment, especially for industries like gaming, online shopping, travel service, online dating, software subscription etc.

Security issue is the biggest hindrance of the development online bank transfer[1]. Users are afraid that their bank account will be stolen by hackers. The low computer penetration is No. 2 factor that prevent the development of e-banking in China. The third factor is that online bank transfer has a more complicated procedure that drive users to use simple and fast third party payment solution.

  1. 2. Features

1) Huge user base

In 2008, China e-banking has 155 million users, and the online bank users will still keep growing in a fast speed in the coming years.

2) Complicated procedure

Online bank transfer has a more complicated procedure than online third party payment. You just need an email address to receive and send money for online third party payment. But users has to fill out a online banking application form when they open account in bank, they also need to provide identity card copy to approve the online bank account.

3) Paid service

Like offline bank transfer, online transfer is paid service. Users need to pay certain amount service fee to send money. While online third party payment is free to send and receive money. They service fee will be much higher for inter-bank transfer.

4) Integration with third party payment platform

Online payment platform like Alipay, Tenpay, Chinapay allow users to deposit money from online bank account to their account on those payment platform.

  1. 3. Users base

According to online bank report by iresearch, the online bank users in 2008 has reached 155 million. Iresearch predict that the users number will increase to 186 million in 2009, and 217 million in 2010.

  1. 4. Market share

Due to complicated procedure, charge fee, and other issues, Online bank transfer market is a bit smaller than online third party payment.

For preference of different online banking service, according to a survey by Analysys.com.cn, 34% users choose Industrial and commercial bank of China as primary online bank service provider, 22% users choose China merchants bank, 19% choose China construction bank.

5.  Growth rate

The total online bank transaction amount has increased 30% in 2006, 27% in 2007 and 20% in 2008. According to the iresearch report[2], the double-digit increase will continue in the following years.

In the same report, iresearch find that the online bank users number has increased from 118 million in 2007, to 155 million in 2008, 186 million in 2009 and it is expected to reach 217 million in 2010. The annual growth rate in 2007, 2008, 2009 and 2010 respectively are 66%, 31%, 20% and 17%. The growth rate has gradually slowed down.

6.  Geographics

The users of online bank transfer are related with the computer penetration, development of banking industry, so young, educated urban residents are main online banking users.

7.  Future trends

Averagely, every Chinese people(1.3 billion population) has more than one bank account and bank card. But only 155 million has used online bank transfer service. So the market potential is huge.

Until the online security concern is addressed, cleared and solved, the procedure of online bank payment is simplified, the speed of interbank transfer increased, and the fee of online bank transfer is lowered, Online bank transfer will catch up and exceed online third party payment.



[1] According to the report at http://www.dtjr.com/Article/Class78/200905/77705.shtml, 1% online bank account has been hacked.

[2] http://www.iresearch.com.cn/html/consulting/online_payment/Graph_id_8774.html

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