What Can Local Sellers (And Regulators) Learn From The Chinese?

Some might think of eCommerce as a global force, where technology underpins transactions done 24/7, and where even the smallest businesses can see significant top-line gains as they tap new markets.

Nowhere is that more evident than in China’s explosive cross-border eCommerce, forecast by the China eCommerce Association to be worth more than 9 trillion yuan ($1.3 trillion) in 2018 alone, and growing at double digits into the current year. Top markets include Japan, the United States and Korea.

And taking effect with the dawn of 2019, the Chinese government has put in place new initiatives tied to cross-border trade flows done by digital means into several markets. Platform operators and merchants must conduct due diligence related to everything from intellectual property and tariffs to tax laws and FX rates. There’s a relatively new wrinkle, too, as Europe has mandated new data privacy processes in the wake of the General Data Protection Regulation (GDPR).

Chinese companies have to work with banks and regulators, increasingly on a daily basis, as they pursue outbound eCommerce. Improving communications and compliance efforts through payments service providers — such as PingPong Global — can reduce time and costs tied to such efforts, bringing revenues back to Chinese firms. It’s a model that the firm hopes to replicate across marketplaces in the U.S. and elsewhere.

PingPong Global — perhaps known for serving a niche for Chinese small and medium-size businesses (SMBs) across any number of verticals — in 2017 received payment institution license from Luxembourg. With the granting of that license, PingPong became the first Chinese FinTech company to establish European offices in that country, with a gateway into an expanded presence for Chinese eCommerce on the European continent.

A Strategy of Global Expansion

PingPong CEO Robert Chen told PYMNTS that the Luxembourg news is only one example of the company’s global expansion strategy, as the firm has offices established beyond China in the United States, Hong Kong and Japan. This gives entrée to new markets for an existing installed base of tens of thousands of online merchants globally, with GMV in 2018 in the high single digit of billions.

The company will use past and continuing efforts with regulators on those continents, cementing presence across dozens of online marketplaces and reaching into more than 40 countries. Chen said that PingPong’s focus will be replicating the success it has had in helping those small but growing sellers to access global buyers, but to be paid locally. PingPong’s business model, he said, is to handle payments for them and also to help develop compliance and risk frameworks.

“Some of them are small now,” Chen said of those marketplaces, “but we see an amazing overall rate of growth for all of them.”

Chen added that the firm now has a presence in some of the largest markets — in North America, Europe and China — and that the firm has been actively working with regulators in each of those marketplaces and is now also looking toward emerging markets in Southeast Asia, India and Africa.

Working with Regulators

Expertise in markets as large as China’s have enabled PingPong to enter other markets, such as Luxembourg — where authorities showed keen interests in eCommerce platforms — and offer insights and education on how eCommerce-related funds and information flow against a compliance backdrop that now includes GDPR. The company has made it a focus to work with regulators, locally, in each of the markets it serves.

Chen noted, too, that in China in the past year, they’ve had a lot more interactions with regulators, in an effort to promote sustainable growth of eCommerce in that country, especially as relates to VAT collection in Europe and and currency regulations and data security, which falls under the purview of the Central Bank.

“We started with payments, which is, of course, one of our core products,” Chen noted, pointing toward the firm’s flagship payments product PingPong Platform Payouts, and where the product portfolio has expanded to actually help accelerate payment processing across borders. “The most important considerations for those payments have been ‘what is the cost, and what is the speed [of those payments]?’ And questions around safety must be addressed. All of this ties into issues related to cross-border trade,” he told PYMNTS’ Karen Webster.

Solving eCommerce Cross-Border Pain Points — and Risks

On that last front, specifically on cross-border payments, Chen noted PingPong’s recent introduction of the Lightyear loan solution, an accelerated payments processing service for sellers that speeds fund flows once the transactions are completed, which helps in an age where supply chains get longer as commerce is increasingly global.

“Oftentimes, the marketplaces will hold the funds for a certain amount of time,” Chen said, extending from “anywhere from two weeks to several months” — especially as goods move across continents. Lightyear helps settle payments on a same-day basis, with funds hitting sellers’ accounts in local currencies. The risk of chargebacks does not interfere with their ability to extend working capital to businesses, said Chen, since they use analytics to parse sellers’ data for two to three months — building up an acceptable “cushion” that takes into account refund trends and percentages of sales before extending terms.

Of course, with eCommerce — where buyers and sellers never meet and where card-not-present fraud can be an ever-present danger — Chen segmented challenges into two types of risk, at least as viewed by his firm. One is account takeover — well-documented in this space — and the second type is merchant fraud. In the latter scenario, the merchant makes a transaction but does not actually ship any products, and then the consumer complains and there will be a chargeback.

Illustrating in-place defenses against account takeover, PingPong will utilize technology that monitors the behavior of the seller. In one example, if the seller logs onto the platform from a “very different” IP address, that action is going to “immediately trigger an alarm” that can be used to block further activity.

The company has also launched a real-time FX offering that allows merchants to manage FX at any point in time, around the clock, with technology provided by multiple international banks.

With its current strategy focused on regulatory readiness, Chen said PingPong will be the first-ever Chinese company able to go directly into new markets and the U.S. in particular, processing the entire flow of cross-border retail transactions from end to end.