Big Commerce Across The China-Russia Border

High volumes of commerce within individual countries don’t always translate across their borders — not even into neighboring regions. Factors such as government regulations and basic technical infrastructure issues often create obstacles for merchants to expand their reach to international consumers.

Mozido’s announcement that its PayEase platform will enable cross-border commerce between China and Russia, however, marks a significant development. Ron Hynes, President of Global Markets at Mozido, recently discussed with MPD CEO Karen Webster how facilitating commerce between those two big neighbors could boost their financial growth and have a positive effect on cross-border business worldwide.

KW: The news of TradeEase creating a gateway between China and Russia to enable cross-border commerce is significant. Can you tell us how?

RH: Take the example of the U.S.-Canadian border: Billions of dollars in consumer retail commerce are moving back and forth across it. There are Canadians coming to the U.S. to get things they can’t get in Canada, and there are Americans going to Canada to get things they can’t get in the U.S. Consumers on each side of the border are motivated to buy from the other by a number of factors, including price differences.

What we’re looking at in Russia and China is very similar. There is a tremendous amount of commerce that happens on the China-Russia border, amounting to between $50 billion and $70 billion dollars in annual volume. Right now, though, it’s all done very informally, and it’s not done conveniently.

It’s a trade zone, and it will expand over time. What TradeEase creates is a commerce platform that will allow the Russian consumer to shop at home, from their phone or from a website, and purchase Chinese goods, and vice versa for Chinese consumers buying from Russia.

KW: Are there particular types of merchants that are early adopters of this capability? Was this done to satisfy a particular trading need?

RH: That’s a great question. I can tell you that at the initial launch we have about 200 merchants onboarded. In the first day alone, we signed up over 1,000 consumers that are registered to begin shopping.

We expect the numbers to grow to 100,000 by the end of the year and 1 million by the end of 2016.

KW: Why has it been so difficult to enable something like this in the past?

RH: I think there are a number of reasons.

First of all, the governments have to be supportive. Today, Russia and China are working together better than they ever have, creating free trade zones on both sides of the border to encourage lower tax rates or, in some instances, excluding tax entirely.

You’ve also got to have the right solution, one that can be introduced to consumers in an understandable way. We have a fantastic cross-border payments gateway, and we have a great partner that we’re working with in Russia, Yandex, to help bring that side of the equation together.

Furthermore, you have to have the logistics worked out. Much of the trade today is people actually going across the border and buying things and putting them in their car, or on their backs, and carrying them home. One of the great pieces of this is the logistical component of — if you’re a Russian consumer buying Chinese goods, for example — actually having products delivered back to either your home or a warehouse in Russia where you can go and pick it up much more conveniently.

Lastly, you must have the support of banks.

I think all of that has to come together, and a big part of it is timing. Right now, China in general is interested in opening up its borders and promoting more cross-border commerce and commerce coming into the country. They want to sell more of their goods and services; in order to do so, they have to allow their consumers to buy more goods and services that may or may not necessarily be from China. As a result, they’re very supportive of TradeEase facilitating that connection with Russia.

KW: Although you enable both Chinese and Russian merchants, do you expect that there will be one side participating at a higher rate than the other?

RH: Today, there is a much greater focus on Russian consumers purchasing Chinese goods from Chinese merchants. In the long term, however, I expect a balance to emerge.

I also expect the merchant categories to be across the board. There’s currently the heaviest volume in durable goods, but you’ll start to see soft goods as well and eventually food being bought and sold in both directions.

KW: You mentioned that this eliminates the inconvenience for those who would otherwise physically travel across the border to get things and then come back.

I’d imagine, though, that you expect this cross throughout the countries of China and Russia and not to just be about consumers that are particularly focused on replacing the physical journey with the digital one.

RH: You have to remember that the development of free trade zones creates an impetus and an incentive for those that live close to the borders. That is the focus.

But we are looking at leveraging this model — not only with China and Russia but with China and many countries.

In some cases, it’s just people wanting access to China in general. We believe there’s some SME opportunity for small businesses, such as those that are manufacturing in China and exporting out, so we’re exploring lots of opportunities to leverage this type of business model with other countries.

KW: Why was PayEase such a significant piece to making all of the things you describe happen?

RH: PayEase, which is a Mozido company, is a payments gateway that’s been in existence for quite a while. It’s contributed to significant growth due to a number of cross-border initiatives that have been put in place that allow Chinese consumers to buy goods and services from Western merchants.

PayEase is uniquely positioned for a number of reasons.

One, they’re directly connected to most, if not all, the banks in China.

Secondly, they are one of just a few entities in China that have facilitated all four of the major mobile payments. That’s something that has to be enabled for opportunity like this — and you can’t do it without the licenses. We’re fortunate that through PayEase we have those licenses.

Additionally, the management team has been focused on this venture for quite some time and has built great relationships, both within China and outside of China. And they’re now starting to come to fruition.