|
PE Interview With Mobile Payment Company Guangzhou Huanxin Information
Tags: Huanxin Information Technology, Internet, Li Xiangdong, SmartPay, UMPay, WVAS, e-commerce, mobile payment,
Guangzhou-based Huanxin currently provides hotel and air ticket booking mobile payment services, as well as other mobile payment services through its Mywallet.com.cn platform. The company is also working with the Guangdong Traffic Bureau to develop an SMS-based traffic violation notification service in Guangzhou. The company plans to develop other local services elsewhere in China.
Pacific Epoch recently spoke with Huanxin CEO Li Xiangdong about China's mobile payments market, the company's several different services, as well as new services in development. Li has over 12 years experience in the telecom industry.
Pacific Epoch: Could you give us an introduction to Huanxin and the company's management team?
Li: Huaxin was established at 2000. Huanxin currently has a team of 23 people, including an R&D development staff of five and a service department staff of ten. We have a three person management team. I am the CEO, Chen Jian is our chief marketing officer and Wu Yongguang is our chief finance officer.
PE: When did Huanxin launch its Mywallet service and how many users does the service now have?
Li: Mywallet started commercial operations in April, 2003. We previously offered full-scale e-commerce services, but since 2005 we have focused on three services: a mobile payment service for business travelers called Shang Lu Yi Hao Tong; a mobile payment service that we provide to e-commerce websites called Zhi Fu Yi; and localized services.
At present, the hotel Shang Lu Yi Hao Tong has more than 2,000 registered users with average monthly user payments of approximately 800 Yuan; Zhi Fu Yi has over one million registered users and users spend 40 to 50 Yuan per month on average. For Zhi Fu Yi, active customers account for eight percent of total users.
PE: What new products is Huanxin working on?
Li: Yes. At present, we are working with the Guangdong Traffic Bureau to offer a service that will notify drivers by SMS when they commit a traffic violation. [The service will send messages to drivers reminding them to pay traffic fines. The service will also rely on video cameras installed on roads that capture the license plate numbers of drivers that commit traffic violations such as running a red light. Huanxin will then notify these drivers of fines via SMS]. This service is one of our localized businesses. We predict the revenue from this service will account for 40 to 50 percent of our annual revenues once the service is stable, which we expect to happen in two years.
In addition, we are planning to develop more mobile payment services for enterprise clients.
PE: Who does Huanxin work with for the Yi Zhi Fu mobile payment service?
Li: We have two partners for the Yi Zhi Fu service: Beijing Capital and Beijing Meng Lian Xing Tong Technology Co., Ltd. Because we do not have direct contact with the e-commerce websites, we need partners to provide our payment solutions to the e-commerce sites. These two companies provide platforms that allow users on e-commerce websites to use our mobile payment tools.
PE: Which banks does Huanxin cooperate with?
Li: We provide credit card payment services through a partnership with China's bank card network operator China UnionPay. We accept all the credit cards issued by banks in Guangdong and work with seven banks on a nationwide basis.
PE: How much are the service fees for each link in your services?
Li: Our Shang Lu Yi Hao Tong service charges a six percent commission for hotel bookings and three percent commission for air ticketeting services. The telecom operators China Mobile and China Union do not charge service fees for this service. For the Yi Zhi Fu service, each e-commerce website charges around two percent in service fees. To date we have cooperated with over 100 e-commerce websites through our partners Beijing Capital and Beijing Meng Lian Xing Tong Technology.
PE: How does Huanxin plan to generate revenues?
Li: At present, Huanxin is still not profitable; however, we expect to be profitable this year, with our major source of profit our new traffic violation message service.
PE: Will Huanxin compete with large ePayment service providers such as Paypal?
Li: Yes. Some large e-commerce websites such as Paypal have not begun offering mobile payment services, even though there are still many security problems with online payment services. In the long-term, mobile payment is a better payment solution. However, due to current technological limitations, mobile payment cannot be applied on a large-scale the way online payment can.
China's 400 million handset users demonstrate that mobile payment is a large market. Huanxin's goal is to make the handset be seen as a mobile wallet and allow every handset user to be able to make purchases via SMS.
PE: Are any other companies offering the same services as Huanxin in China?
Li: The other large companies offering these services are Shanghai SmartPay and Beijing UMPay. However, we are targeting different segments of the market.
Besides these two companies, there are many small mobile payment companies; however, they only operate payment businesses on a small scale. Only Huanxin, SmartPay and UMPay cooperate directly with China UnionPay.
PE: Are there currently any regulations for Chna's mobile payment industry?
Li: There is currently no regulation of the industry at present; however, the government does intend to regulate the mobile payment industry. The People's Bank of China has collected opinions on e-commerce payment regulation since 1995, but the results still have yet to be released. In my opinion, regulations for the industry are bound to be issued, which could help the mobile payment industry develop in a healthy way.
PE: What do you think is the potential size of China's mobile payment market?
Li: It is difficult to predict what size the market could get. I believe 30 percent of handset users could become mobile payment users. If we assume - and this is just my own estimation - every mobile payment user pays an average of 300 Yuan a year for mobile payment services, then the market could reach 36 billion Yuan. I believe we could reach market capacity in two to three years.
PE: What are Huanxin's capital raising plans?
Li: Huanxin has 200 million Yuan in capital at present. We are planning to introduce investment, but [company management] will maintain a controlling interest in the company. According to the regulations which may be released soon, foreign companies will not be able to control domestic mobile payment companies. We prefer long-term strategic investors to venture capitalists.
|
