Everything You Need to Know about Cross border Payments into China
Cross-border payment is a core component of globalization. It allows businesses from every part of the world to be more active in the global market space. For example, if you are in an international business relationship with Chinese suppliers or distributors, you will need to make such payments for goods procured or collect payments for goods supplied. Cross border payments are defined as the transactions involving companies, banks, individuals, or settlement institutions operating in at least two different countries. Small and Medium sized Enterprises (SMEs) looking to conduct regular B2B cross border transactions in China may wish to better understand payment systems to decide the best payment solution to use.
For businesses that are operating internationally, it is vital that they can accept payments across all countries they are dealing with. As a result, many merchants around the world work with payment service providers to ease the stress of international money transfers. Payment gateways act as the medium between both parties during the transaction and this medium is ideal because funds can be sent securely, and there is a validation of the payment and encryption of all the financial data.
It is worthy to note that the payment gateway you want to use must have a wide range of payment options, especially one that accepts local currencies when paying before you commence a cross border payments gateway into China. This is because point-of-sale payment acceptance is in customer’s currency of choice while Chinese suppliers want payment in their local currency.
This article will shed light on how cross-border payment into China works and the best way to go about it. Let’s explore more.
Types of Cross border Payments
Below are the two main methods that are generally used for cross border payments:
International Bank Transfers
Using International Bank Transfer or Wire Transfer is one of the oldest and most common methods of making cross border payments. Close to 90% of B2B payments in China are processed by banks rather than by fintech firms, according to Forrester Research.1 One major disadvantage though is that banks carry a limited number of currencies. That is, there is always a transfer limit at any given time. If you are in a country trying to transfer to your merchant in China, you must ensure that your bank has the Chinese currency in stock. If they do not have one, they are most likely to rely on their foreign partners to engage in the transaction and typically take a longer time.
International bank transfer fees are high – not only do you will need to factor in the foreign exchange rates your bank charges (which are never favorable), there are fixed fees coming from your bank as well as the recipient’s bank and correspondent banks in the SWIFT network with every transaction. For a SME, these transaction charges can add up quickly. Since these transactions can take more than 5 business days to process, the supplier also bears the risk of any currency fluctuations from the time of payment to the date the payment is received.
Fintech Electronic Wallets
Electronic wallets are also known as digital wallets used for making online and cross border transactions. Most of these electronic wallets are available on mobile and web apps. Electronic wallets also allow users to safely store the payment cards of their choice and provide a safe and secure means of paying for goods and services for individuals in China.
The good thing about most of these electronic wallets is that businesses are able to conduct operations in different currencies. These fintech companies skip the SWIFT network that banks utilize, thus they incur less hidden fees than what banks charge. Transfers are also much quicker. In fact, it is safe to say that they are a great facilitator of the cross-border payments into China.
Challenges of Cross border Payments into China
As part of the country’s measure on cracking down on fraudulent transactions and money laundering, cross border payments coming into China are inspected more closely than domestic transactions by Chinese banking officials – risking unprecedented delays and longer time for the money to reach your recipient.
Cross border payments coming into China also require lengthy verification processes and many supporting documents from the remitting banks prior to processing the payments, which most of the time, are manually processed. This could also depend on the number of banks that act as intermediaries during the transaction. The more financial institutions involved in the transaction, the longer the transaction will take.
This proves to be a major challenge for suppliers in China when having to accept cross border payments. Their money always needs to navigate several territories before it gets to them.
Understandably, every supplier is concerned about receiving payments fast and in the most cost-effective way. This is why most merchants work with providers that are transparent about the entire transaction and fees. While most international payments take up to 5 business days to fulfil and this timeline strictly depends on the country the funds are coming from into China, conducting your cross-border payments with AP-1 Business can do it in half that time, and in the most cost-effective way.
AP-1 Business as a Solution
AP-1 Business is a digital business account that offers businesses in Singapore a quick and easy way to make B2B payments into China. It is the only digital commercial account issued outside of China to facilitate cross border payments in the most swift and secure manner. AP-1 Business’s cross border payment solutions aim to serve the unmet needs of SMEs and provide the best payment strategies for businesses that need to pay into China.
AP-1 Business allows businesses to deposit funds, remit and make payments to Chinese suppliers’ UnionPay commercial accounts, who would promptly receive the payments within T+1. Merchants who enable UnionPay payment acceptance for customers through Aleta Planet can also receive their sales proceeds in their AP-1 Business Account within T+1 (for SGD).
Why You Should Use AP-1 Business for Cross border Payments into China
We understand that opening a business account to send money into China can be one of the most stressful processes to go through, so we aim to simplify it all:
Ease of opening a business account
AP-1 Business is one of the few business accounts that can be opened without a director’s physical presence. All we require you to do is submit the required documents online, and we’ll do all the work.
Several options for payment collection
Aside easing your struggle with facilitating cross border payments, AP-1 Business provides you with options for payment collection with ease. You can choose to accept payments from UnionPay, WeChat Pay, PayNow, Discover, Diners Club and JCB, and receive your sales proceeds within T+1 (for SGD).
Shortest transfer time
Unlike other means of cross border payments, AP-1 Business gives you the shortest transfer time when transferring funds to Chinese suppliers. With this platform, you can remit to your registered supplier’s UnionPay account in China within T+1. Less than half the time it would take for a payment made via telegraphic transfer.
ATM cash withdrawal
The AP-1 Business account gives you access to ATM cash withdrawals in China through Huawei Pay and anywhere in the world through a physical VISA card (coming in Q2 2021).
Direct FX rates
We want to ensure that you receive the best rates when you facilitate your cross-border payments. With AP-1 Business, you can receive Direct FX rates in China using the UnionPay network.
How to Open an AP-1 Business Account
The AP-1 Business Account opening is fully digital. All you need is to submit the following required documents to firstname.lastname@example.org and get your account opened within 5 working days:
- Business Account Application Form and Agreement
- Company Business Registration
- Documents Director's Identification
- A copy of the Company's Ultimate Beneficial Owner's ID
If you are a merchant looking for the best way to thrive in the Chinese market, AP-1 Business promises the simplest and most secure solution for cross border payments into China. Payment procedures into China should no longer be as complex as they used to be. One smart move you should consider is dealing with AP-1 Business. Your cross-border payments into China will be seamless, easy, fast, and secure.