We all know the lure of China’s consumers for retailers and merchants of all stripes and sizes operating across the globe. Gathering wallet share of hundreds of millions of young, urban and newly flush Chinese consumers as they search online for goods and services is increasingly attractive for merchants and marketplaces alike.
But what about the converse — where Chinese companies are conducting their own cross-border businesses, selling in every corner of the globe?
Enter PingPong Global, which makes it easier for SMBs, manufacturers and global brands to collect cross-border payments from customers across eCommerce marketplaces as ubiquitous as Amazon, Wish and Newegg.
The firm, founded in New York in 2015 and now located in Hangzhou, with offices in San Francisco, Shenzhen and Luxembourg, has operated since February 2016 with Amazon as its anchor client. The company has been experiencing extraordinary growth, ratcheting up more than $1 billion in total processed volume, as measure solely in the United States this past spring.
PingPong Global’s niche is not only being the first, and only, FinTech company created solely to focus on sellers and merchants based in China. The company has also established the first secure and trusted compliance, vetting, KYC (Know Your Customer) and regulatory approval process for China-based sellers so that global marketplaces can have access to this massive eCommerce engine without operational, logistical, technological, payment or ERP fears.
Additionally, cross-border payments mean that firms have to work with banks, regulators, compliance and even cultural nuances that can all add up to friction that hinders smooth eCommerce. PingPong Global maintains that it has solved that complex part of the SMB business for its marketplace partners in the Chinese economy.
In an interview with PYMNTS’ Karen Webster, PingPong CEO Robert Chen said that his firm helps solve existing problems for Chinese sellers, with a particular focus on SMBs.
As those businesses start to sell to the global consumer across marketplaces such as Rakuten, Amazon or eBay, the payment process needs to be easier and more transparent. Millions of SMBs looking to branch out from China struggle in the search for, and implementation of, a payments infrastructure.
Thus PingPong Global has developed a standard and yet versatile payments solution for firms so they can accept payments from platforms anywhere. The solution integration, which varies from a simple bank transfer to a full-fledged API connection, is closed-loop, compliant and regulatory for China-based sellers and global marketplaces.
Webster posited that the company is accepting the risk, and therefore the question must be asked: How can buyers be sure that a seller is indeed offering legitimate merchandise?
Real or imagined, some Chinese retailers are known to sell counterfeit goods, agreed Chen. “That is a battle that we work together with the marketplaces to fight,” he told Webster. Firms like Amazon have their own KYC process that must be satisfied before they onboard any sellers.
PingPong Global, said Chen, differentiates itself from its competitors by taking a secondary review of products and their sellers. Think of it as a second line of defense, with a bit of a new wrinkle: Experts from PingPong Global will ascertain that all is as it should be — in person. With headquarters in Hangzhou and an office in Shenzhen, the firm has what Chen said is a “deep understanding” of how regulatory frameworks work within the country. PingPong Global will send informal inspectors into merchants’ stores to see if there is anything suspicious on the shelves.
As a result of these combined efforts, the percentage of PingPong Global marketplace customers who encounter “bad actors, charlatans and fraudsters from China” is significantly lower than other providers across a much larger pool of potential sellers, Chen said.
In many cases, Chen continued, firms may violate intellectual property laws because they don’t understand where some compliance boundaries lie. Some companies, for instance, may use online photos to demonstrate a product, but a truly accurate representation may not be available. So, in lieu of the perfect document, those companies may take a computer image and tweak it a bit, which then, in turn, violates copyrights — all without intention. Here, PingPong Global might take a proactive approach and call that company, said Chen, alerting them to the possible pitfalls over IP (intellectual property).
In the end, agreed Chen and Webster, it is the perception of a violation (in the eyes of regulators) that can make all the difference and cause headaches for firms selling legitimate merchandise in the Chinese economy.
Currency controls also offer a challenge for businesses of all sizes in China, said Chen, with a “subtle regulatory environment” in place. The global payment networks are sometimes not as successful in China when tackling these controls.
To tap into China’s “outbound” commerce market, which is, of course, huge, Chen cautioned that, “You really have to immerse yourself in its culture and business practice and develop a deep relationship with the regulators and government agencies.”
China’s government entities, he said, are relatively open-minded, as is the central bank, when it comes to FX (foreign exchange) and other currency policies.
Another regulatory area that PingPong spends significant resources on is to make sure emerging cross-border sellers get the appropriate attention from regulators overseas. PingPong obtained a Payment Institution license in Luxembourg recently by walking through the intricacies of the eCommerce flow with EU regulators. Chen expressed his excitement with the development: “We are very pleased [after] working with the financial regulators and are extremely proud to the first FinTech firm based in China to obtain the license. We look forward to [having] more in-depth discussions with all stakeholders to reimagine the next wave of eCommerce.”
This is where PingPong Global stands out from all FinTech players, said Chen. Most companies come to China and minimally staff an office in Hong Kong or Shanghai and/or loosely partner with other providers.
PingPong Global is embedded in the business, banking and regulatory community, knows the players and is a substantial employer in both of its offices. They simply know the terrain better than anyone else, he told Webster.
One of the key areas PingPong Global excels is in cost of repatriation. “We’ve reduced the cost of payments by about two-thirds or more,” Chen told Webster, adding that just a few years ago, a seller in Hong Kong might be paying more than 3 percent per transaction on fees, with additional charges coming through FX activity. PingPong, he said, charges a flat 1 percent fee with no variance.